Austria: Economy has to get along without support for the time being
The new turquoise-green coalition in Austria has put the promised tax cuts into concrete terms at a government meeting. That is to be welcomed. After all, the economy picked up only slightly at the end of 2019 and economic momentum remained low overall. According to initial estimates, economic growth in the final quarter was 0.3 per cent compared to the previous quarter, after a meagre 0.1 per cent in each of the two preceding quarters. The weakness of the economy continues to be caused primarily by the industrial sector.
The planned cuts in income and corporation tax would certainly have the potential to give the sluggish economy a boost. Unfortunately, however, the measures will only be implemented gradually, starting in 2021, when at least the first marginal rate of income tax will be reduced from 25 to 20 percent. Until then, the economy will have to get by without support.
For the time being, therefore, we do not anticipate a rapid acceleration in economic momentum. The many international political and economic risks continue to put the brakes on growth. Overall, the economy of the Alpine country is likely to grow by just under 1 percent in the current year. In 2021 we expect a somewhat faster increase in gross domestic product of 1.4 percent. This is based on the assumption that by then industry will support growth again and private consumption will increase significantly.
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