Inflation in Austria has declined, and economic growth has returned since the beginning of the year, according to the latest inflation forecast by the Austrian National Bank (OeNB).

The rate of inflation is predicted to fall to 3.6% this year, a considerable improvement over 2023, when a rate of more than 11% was registered.

The positive trend is forecast to continue over the next few years, with 2.7% inflation projected for 2025 and 2.3% for 2026.

One major reason for this decrease is the implementation of governmental fiscal policies, such as the electricity price control and the grid cost subsidy, which have contributed to reducing inflation, notably within the energy industry.

Furthermore, the increase in prices for food and non-energy-related industrial goods has also experienced a slowdown.

As well as the improvement to the inflation situation, Austria’s economy returned to moderate growth at the start of this year.

Following a period of recession in 2023, GDP is set to grow by 0.5% in 2024 and then by 1.8% in 2025.

This trend will also be bolstered by the housing package recently enacted by the government, which is set to deliver a substantial economic boost.

Moreover, the core inflation rate, excluding energy and food prices, is forecast to remain higher than the general HICP (Harmonised Index of Consumer Prices) inflation over the entire forecast period. 

This suggests that the service sector will continue facing inflation rates above the average, driven by robust demand for tourism and increasing wage pressures.

Despite these encouraging signs, it's unlikely that Austria's inflation rate will fully converge with that of the eurozone in the medium term. As it stands, the inflation differential is approximately 1.5 percentage points and is anticipated to decrease to 0.6 percentage points by 2026. 

Nonetheless, the disparity with the eurozone is predicted to return to a level similar to that observed between 2011 and 2021.