Austria: Above Expectations

With strong economic expansion, a falling fiscal deficit, an outlook of rapidly declining debt, and upcoming pro-green-growth tax reforms, Austria won the plaudits of the International Monetary Fund in a June 2022 staff visit. While the Alpine country was hit relatively hard by the covid-19 pandemic, due to its large tourism sector, the rebound has been remarkably robust, supported by active government policy that has cushioned the economy and particularly the less well-off, while promoting an accelerated energy transition. "We've come out of the pandemic stronger than we went into it," Chancellor Karl Nehammer said in September 2022.

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Indeed, the IMF noted that Austria's real GDP surpassed its pre-covid level before the end of 2021; the fund said that the government's policies to respond to the pandemic and maintain economic momentum were "appropriate and effective in supporting households and firms". The government ran substantial deficits to combat the pandemic's impact, but this year "the fiscal deficit has fallen sharply", the IMF reported. It is expected to come in at around 2.5% of GDP this year, and 0.5% of GDP in the medium term, allowing the public debt-to-GDP ratio to "decline rapidly". The Organisation for Economic Cooperation and Development expects Austria to be running a primary surplus as soon as 2024. This in turn will give Austria the fiscal headroom to support the economy through a difficult year.