Economy remains weak entering 2024, inflation still high

GDP shrinks again in the third quarter.
Too early for interest rate cuts.
AT risk premium remains high.
Dollar should weaken further.

Erste Bank Research Team Erste Bank

After a boom in 2022, the Austrian economy fell into recession from 2Q23. Industry and trade were particularly weak. Tourism supported the economy with a record number of overnight stays in the summer season. Inflation has fallen recently, but remains well above the Eurozone average, due to high energy prices and 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 December 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 fallen sharply since November. 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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Erste Bank Research Team

Erste Bank

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