Austrian think tanks predict deeper recession after second lockdown

Austria's two main economic think tanks predicted on Friday a deeper recession this year in light of a second coronavirus lockdown that ended last week, and ahead of a third lockdown that will begin after Christmas. In its latest quarterly economic forecast, Wifo, which for many years compiled gross domestic product (GDP) data for the government, predicted that GDP would shrink 7.3% this year, down from 6.8% in the last quarterly forecast in October.

Austria's two main economic think tanks predicted on Friday a deeper recession this year in light of a second coronavirus lockdown that ended last week, and ahead of a third lockdown that will begin after Christmas.

In its latest quarterly economic forecast, Wifo, which for many years compiled gross domestic product (GDP) data for the government, predicted that GDP would shrink 7.3% this year, down from 6.8% in the last quarterly forecast in October. Its peer, IHS, forecast a fall of 7.5% this year, having predicted 6.7% in October.

"The recovery in the summer was stronger than expected and was, compared to the depth of the earlier slump, larger than average," Wifo said, explaining the "relatively small" downward revision of its forecast for this year. Robust international trade was another reason the second lockdown had a limited effect on growth, it said.

The forecasts were slightly more pessimistic than those the Austrian National Bank published last week. It predicted GDP would shrink 7.1% in 2020. Regarding next year's recovery, however, the think tanks' forecasts were split on either side of the central bank prediction that GDP will grow 3.6%.

IHS predicted an increase of 3.1%, down from its previous forecast of 4.7%. Wifo's forecast before the announcement of the third lockdown was barely changed at 4.5%, compared with 4.4% in October, falling to 2.5% in the event of another lockdown.