Iran war continues to weigh on economic activity
The disruptions associated with the Iran war continue to weigh on economic activity even after the conclusion of the framework agreement between the USA and Iran. As a result, Austrian real GDP is expected to stagnate in the second and third quarters of 2026 and to only regain momentum toward the end of the year. IHS therefore forecasts economic growth of 0.8 % and 1.0 % in 2026 and 2027 respectively. Due to the renewed energy price shock, the inflation rate is projected to average 3.0 % in 2026 and to remain above the ECB's 2 % target in 2027, at 2.3 %. IHS expects the unemployment rate to reach 7.5 % this year before declining to 7.3 % in 2027. Following a budget deficit of 4.2 % of GDP in the previous year, the deficit is projected to amount to 4.0 % of GDP in 2026 and to decline further to 3.7% in 2027.