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Uncertainty hampers economic rebound‏

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Uncertainty hampers economic rebound‏
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12:40 CEST+02:00
The likelihood of Austria's economy picking up this year looks slim, according to the latest forecast from the European Commission (EC).

Austria’s growth in 2014 remained weak and business and consumer confidence have continued to slide, the EC noted.

Low investment growth is predicted to handicap the economy’s readiness to benefit from a recovery in international trade, and bank restructuring costs and income tax reform plans have contributed to uncertainties about the fiscal outlook.

GDP growth for 2015 is expected to be around 0.8%. Business and consumer sentiment indicators for the beginning of the year indicate more weakness over the next few months, according to the EC.

GDP growth in 2016 is forecast to strengthen to 1.5 percent, supported by domestic demand, although this will also depend on a pick-up in international trade and a more vigorous response from investment and consumption to supportive factors such as the low interest rate environment.

Low interest rates are also forecast to benefit housing demand, which, together with rising house prices in recent years, are expected to revive construction activity.

Slowing inflation and a stable labour market are expected to support consumer purchasing power until growth consolidates in 2016.

The income tax relief taking effect next year is expected to lead to an increase of both consumption and household savings.

For years Austria has had one of the lowest unemployment rates in Europe, but it is gradually rising and is now at a record high of 5.8 percent (behind Germany, which has 4.6 percent). 

Employers’ expectations suggest job creation could remain slow in 2015 but it is projected to pick up in 2016 when GDP growth is expected to be stronger.

The EC predicts that unemployment, however, could be slow to decline, as labour supply is likely to keep increasing on account of immigration.

The general government deficit stood at 2.4 percent of GDP in 2014 - better than previous expectations due to a positive revision of 2013 data and to lower expenditure in 2014.

The deficit is forecast to decline to 2.0 percent of GDP in 2015.

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