Austrian institutes upgrade 2011 growth forecasts

Two leading Austrian think-tanks have upgraded their growth forecasts for this year, saying the previously export-driven recovery was moving to a broader footing.

Nevertheless, higher oil prices – not least due to the current unrest in the Middle East – combined with more restrictive economic policies in many of the world’s leading economies would put the brakes on growth slightly again next year, the institutes predicted.

WIFO, which calculates gross domestic product (GDP) data for the government, forecast growth at 2.5 per cent in 2011, higher than its previous prognosis of 2.2 per cent.

But it left unchanged its 2012 forecast at two per cent.

For fellow think-tank IHS, the economy was set to grow by 2.3 per cent this year, an upward revision of 0.2 percentage point from its earlier forecast. And growth would then slow to 2.1 per cent in 2012, IHS predicted.

“The recovery is continuing. Thanks to strong global growth, exports are rising fast,” WIFO said in a statement.

“And the recovery in exports is spreading to investment.”

Nevertheless, following a strong first half of the year in 2011, the Austrian economy would, “in parallel with the global economy, weaken slightly after that,” WIFO forecast. “Rising raw material and energy prices pose the biggest risk to growth at the moment and could have a significant effect on the global economy,” it cautioned.

IHS agreed, suggesting that rising oil prices as a result of the unrest in the Middle East would eat into the purchasing power of Austrian households.

In addition, more restrictive economic policy in industrialised and developing nations “will put the dampeners on growth,” WIFO said.

IHS warned that high public deficits in some eurozone countries would lead to higher interest rates and undermine confidence in the single currency area’s economy.