Economic activity is projected to slowly recover from the current downturn, with GDP rising by 0.2% in 2023 and 1.6% in 2024, supported by stronger domestic demand. Headline inflation will gradually decrease and rising real wages will support household incomes from the second half of 2023. Tight labour market conditions will loosen slightly over the projection period, bringing a small increase in unemployment. Business investment will be damped by elevated interest rates and labour costs.
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Austria is set to overcome the COVID-19 shock and its economic scars with the help of genuine sanitary, health and economic support policies. The country faces the opportunities and the challenges of two major structural transformations: transition to a net zero emission economy, and the generalisation of more advanced forms of digitalisation. New entries and exits in the business sector, more capital and labour re-allocations, and greater geographic mobility of labour invite new policy measures to boost social cohesion by improving the adaptation of skills to jobs, improving the social protection of free-lance workers, and accelerating the social, economic and educational integration of groups of migrant origin.
COVID-19 risks reinforcing long-standing vulnerabilities in the labour market such as digital skill gaps, diverging career trajectories between men and women, an elevated rate of long-term unemployed and subpar integration of migrants. Addressing these issues is crucial for a more inclusive recovery, facing demographic change and the sustainability of social security systems.
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