In its current economic prognoses, the Organisation for Economic Co-operation and Development (OECD) speaks of an increase of the economic performance again. For Austria, the OECD sees a growth of 0.9 percent in 2010; in the following year, the GDP should rise by 2.2 percent. The European region reached the bottom of the economic trough in the second quarter of 2009; after this, the prognoses by economic researchers from the Austrian Institute of Economic Research (WIFO), the Institute for Advanced Studies in Vienna (IHS) and the OECD show positive numbers again. Significantly contributing to this was the stabilization of the financial markets as well as the numerous national and international economic stimulus packages, which are now making an impact. “Unprecedented policy efforts appear to have succeeded in limiting the severity of the downturn and fostering a recovery to a degree that was largely unexpected even six months ago,” OECD’s Acting Chief Economist, Jorgen Elmeskov, said when presenting the current economic prognoses.

With United Powers

The European Economic Recovery Plan (EERP), adopted by the European Council, outlines the measures of the individual countries as well as the programmes by the European Commission, supporting the EU’s economies with a financial volume of approximately 200 billion EUR. This corresponds to 1.5 percent of the EU’s gross domestic product. 80 percent are covered by additional budget funds from the member states, and 20 percent by EU funds. The measures have to meet three criteria: They need to aim at having a fast and possibly immediate impact, be of a temporary nature, and be applied to the key sectors that are affected the most.

Prognoses by WIFO and IHS

In mid-December of 2009, WIFO and IHS presented their economic prognosis data for 2009, 2010 and 2011. Besides the high budget deficit, the directors of WIFO and IHS, Karl Aiginger and Bernhard Felderer, see the biggest political challenge of the coming years in the unemployment rate, which due to the economic crisis will continue to rise at least until 2011. Even though the economy returned to a growth path in the third quarter of 2009, the 1.5 percent of real growth in 2010 and 2011 respectively would not be sufficient to lower unemployment rates. And in the midterm, GDP growth of more than two percent does not seem to be in sight. According to national calculations, unemployment rates are expected to rise from seven to eight percent by 2011; within Europe though, Austria is in second-best place. After four quarters with negative growth, the GDP grew by 0.5 percent in the third quarter of 2009, as Aiginger reports: “We have reached the turning point.” For the fourth quarter (the first assessment will come in mid-February of 2010), WIFO anticipates a growth of 0.7 percent. In 2009, Austria performed better than the general European region the sixth year in a row. The automatic stabilizers and economic stimulus programmes have averted a further slump. With regard to the economy, “spring has sprung” in Austria; however, it is only a “very bumpy” and “very hesitant” recovery and “not yet a dynamic one”. There is a small risk of a great setback and the other way around, according to the WIFO director. Aiginger also thinks the risk of having to revise the current prognoses either upwards or downwards is just as high. Felderer says that upwards adjustments could possibly happen in 2010; for 2011, he sees the risks to be distributed equally, but says that 2011 might be overestimated. In the opinion of IHS director Felderer, the European Central Bank (ECB) now has the “monumental task” of slowly returning liquidity to the markets. The keepers of the Euro will “maintain the low prime rate of one percent for as long as possible”. In 2010, there might not even be a rate increase by the ECB; at best, a minor one in the second half of the year. Long term, there could be a stronger interest boost in 2011 than anticipated today, says Felderer.[ IN ]