Heightened Cyclical Risks. Economic Outlook for 2005 and 2006

The projection for GDP growth in 2005 and 2006 remains unchanged, but the risk of adverse developments has increased. The further cyclical profile in the euro area is uncertain, since the gains in exports and corporate earnings have so far not translated into the expected higher investment and consumption. The high oil prices constitute a further risk element. The Austrian economy should fare better than the euro area average, on account of the demand incentives resulting from the tax reform. GDP is projected to grow at a steady 2¼ percent annual rate in 2005 and 2006. This will not suffice to lower the rate of unemployment, given the massive increase in labour supply.WIFO Economic Outlook