Economic growth revives in the first quarter

GDP improves mildly: According to a second release, GDP returned to growth in Q1, rising 0.1% on a seasonally and calendar-adjusted quarter-on-quarter basis (preliminary reading: +0.2% qoq s.a.; Q4 2024: 0.0% qoq s.a.). On an annual basis, GDP declined 0.4% in Q1, matching Q4’s figure and marking the joint-smallest decrease since Q1 2023.

Net trade and public consumption drive growth: Domestically, government spending rebounded 2.3% in sequential terms (Q4 2024: -0.2% qoq s.a.), the fastest increase in four years. Meanwhile, private spending expanded for the third month running, although at a weaker pace, with growth clocking in at 0.1% (Q4 2024: +0.8% qoq s.a.): ECB rate cuts likely beefed up household budgets by cheapening mortgage payments, although higher inflation kept a lid on the improvement. On the flipside, fixed investment contracted for the third consecutive quarter, although at a softer pace of 0.2% (Q4 2024: -0.4% qoq s.a.) as the aforementioned interest rate cuts likely limited the fall. On the external front, exports of goods and services fell 2.7% (Q4 2024: -2.5% qoq s.a.), while imports contracted 1.1% after stagnating in Q4 2024. Overall, net trade contributed positively to headline economic growth for the first time in a year.

Economy to stagnate in 2025: Our panelists expect sequential economic growth to hover around Q1’s weak level in the next quarter, supported by lower interest rates but weighed on by a less favorable panorama for trade. In 2025 as a whole, the Austrian economy is expected to flatline after having contracted in 2023–2024. Fiscal consolidation will likely hamper public spending growth, and exports should remain in the doldrums amid a still-weak German economy and U.S. import tariffs. That said, ECB rate cuts will drive improvements in the readings for private consumption and fixed investment. Sooner-than-anticipated defense spending in the EU bloc and faster-than-expected rollout of Germany’s fiscal stimulus are upside risks.

Panelist insight: Commenting on the outlook, UniCredit analysts stated: “We continue to expect slight growth in the Austrian economy for the rest of the year. Due to the revision of the previous year, there is now the realistic chance of a slight increase in GDP […] for the year as a whole, with [our] GDP forecast unchanged during the year.”

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