Domestic demand supports growth
GDP growth in the euro area slowed further in the second half of 2018 and is likely to remain weak at the beginning of 2019. GDP growth in Austria also lost momentum through 2018, after a strong start at the beginning of the year. Supported by robust domestic demand, the Austrian economy is expected to grow by 1.5 % in 2019 and 1.6 % in 2020, after 2.7 % in 2018. Inflation is projected to be moderate at slightly below 2 %, while unemployment should not fall any further and remain relatively high at 7 ½ %. The current political and economic uncertainties (disorderly Brexit, escalation of trade tensions, slowdown of global economy) are significant sources of downside risk to domestic growth. Deep structural reforms, which the Institute has been calling for repeatedly, could strengthen the growth potential of the Austrian economy and increase its resilience to international economic shocks.