The recovery of the Austrian economy will gain pace with output expanding by 3.4% in 2021 and 4.2% in 2022. A rebound in global trade and generous government support underpin strong investment growth. Consumption will improve as households reduce their saving. Worldwide progress with the deployment of vaccines will allow the easing of travel restrictions and thus foster activity in hospitality sectors and employment in the second half of 2021. The increase in commodity prices will result in a moderate and temporary uptick in consumer price inflation. The fiscal deficit is planned to decline in 2021 and 2022.
Fiscal policy should remain supportive until the recovery is fully underway. The generous incentives for investment targeted at climate protection and digitalisation will ease the transition towards a greener economy and also boost potential growth. To ensure a smooth recovery across all sectors and regions, the authorities need to address the elevated leverage of small enterprises in the heavily hit hospitality industry. To promote non-debt creating financing options for businesses, the government could consider tax incentives for corporate equity and retained profit.