Weak economic growth expected in 2024, inflation declines slowly
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Weak GDP growth expected in 2024
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ECB awaits further data
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AT spread against Germany remains high
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Slight weakening of Dollar expected.
After a boom in 2022, the Austrian economy fell into recession in 2023. All major components of GDP declined on the expenditure side. We expect the extremely moderate recovery of the economy to set in 1H24. Inflation has fallen recently, attributable to falling energy prices and diminishing food inflation, but remains well above the eurozone average due to inflationary pressure in the services sector. The latter, supported by wage increases, is likely to keep core inflation high for a while yet.
At the March meeting, the ECB Governing Council left the key interest rates unchanged. The outlook, which points to stable interest rates, also remained the same as at previous meetings. Yields on German government bonds have risen from low levels. Yields on 10-year Austrian government bonds have been trading at above-average risk premiums compared to German yields since 2022.
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