Economic output in 2020 will shrink by at least 2%
Unemployment will increase to an average rate of 8.4%
Expected deficit of around 5% of the gross domestic product (GDP)
(Vienna, March 26, 2020) The Covid-19 pandemic and the policies implemented to contain the spread of the virus have led to a global economic downturn. The Institute for Advanced Studies (IHS) forecasts a recession in Austria, where economic output will decline by at least 2% in 2020. This forecast is based on the assumption that the policies implemented to contain the spread of the virus will be lifted by mid-April. Therefore, these predictions of the economic downturn should be viewed with the understanding that they are dependent on the development of the pandemic and the accompanying economic, political and health policies.
“We support the decisions made to try and contain the spread of the virus. The immediate pressures on the economy are high, however, the containment policies and the 38 billion investment in the economy increase the chances of a swift recovery”, explains Martin Kocher, the Head of IHS. Due to the loss of production, unemployment has at least temporarily rapidly increased. By the end of the year, the unemployment rate is expected to reach 8.4%. The extensive measures by the federal government amounting to 38 billion Euros are intended to stabilize official development but will have a negative impact on the budget - a deficit of around 5% of GDP will thus be unavoidable.
The redesigned model of short-term employment should facilitate a swift return to economic normalcy. “We are concerned about the massive wave of redundancies last week with over 100,000 newly registered as unemployed. However, we hope that the offer to finance short-term employment will be accepted because this could be decisive for how quickly economic activity will start again as soon as the restrictions can be reduced” explains Helmut Hofer, the Spokesperson for Economic Policy at IHS.
Significantly, it seems vital to rapidly develop Corona testing capacity to help diminish the spread, and in order to more precisely control the limits of economic activity. "South Korea showed that the response time to the containment measures and the subsequent economic damage are linked to the evidence about the distribution of the virus," stated Martin Kocher.