The disruption caused by the conflict in the Middle East is slowing the Austrian economy’s recovery. However, the economy is expected to regain momentum in the second half of 2026 after a brief period of weakness. Consequently, IHS continues to forecast economic growth of 0.8 % for the current year and 1.0 % for next year. As the rise in energy prices triggered by the war in Iran is lasting longer than was anticipated in the summer forecast, the inflation forecast for the current year has been raised to 3.1 %. At 2.8 %, inflation is also expected to remain well above the European Central Bank’s 2 % target next year. IHS expects the unemployment rate to be 7.6 % this year and 7.4 % next year. After running at a 4.1 % budget deficit last year, this is projected to amount to 3.9 % and 3.7 % relative to GDP in 2026 and 2027, respectively.