In 2024, the inflation rate fell sharply to +2.9%. However, the pace of decline slowed significantly in 2025. Due to the withdrawal of government support schemes (such as the electricity price cap), increased CO₂ pricing and higher network charges, energy prices rose markedly in January 2025, causing the inflation rate to rebound at the beginning of the year. It climbed to over +4% in the summer and remained at this level until the end of the year. On average, inflation was +3.5% in 2025. At the beginning of 2026, the impact of the January 2025 energy price increase will disappear, causing the inflation rate to fall by up to -1pp. Nevertheless, the higher overall inflation in the second half of 2025 will also carry over into the following year, meaning that inflation will decline slowly. The annual average is expected to be +2.4% in 2026 and to reach the target in 2027. 

Public finances are under considerable pressure to consolidate. In 2024, Austria's fiscal deficit stood at -4.7% of GDP, following a deficit of -2.6% in 2023. The general government deficit narrowed only slightly in 2025, remaining above the 3% Maastricht threshold. Despite the new government's fiscal-consolidation efforts, including EUR4bn in deficit-reduction measures (e.g. abolishing climate bonuses and raising indirect taxes), the impact is limited due to modest cuts in government consumption and investment. There is also upward pressure from weak economic conditions, rising unemployment-related spending, declining EU transfers and dividends, higher interest costs and increased defense spending. By 2026, further fiscal adjustments and improving macroeconomic conditions should lower the deficit to -4.2%, and it should fall further to -4.0% in 2027. 

The Austrian business environment proves strong: the country scores very well in regulatory quality, rule of law and control of corruption. In addition to its strategic location in Europe and high-quality infrastructure, Austria offers a skilled workforce and robust legal framework.

Austria has a federal, parliamentary republic system with power divided between the federal and nine provincial levels (Bundesländer). Its democratic government operates on separation of powers and a multi-party Parliament with to chambers (Nationalrat and Bundesrat), ensuring representation and checks and balances, as established by its Constitution. In Austria's 2024 election, the far-right FPÖ won nearly one-third of the vote, gaining support from former ÖVP voters and encouraging non-voters to participate. However, they failed to form a coalition. Despite their victory, both the ÖVP and the SPÖ rejected the idea of cooperating with the FPÖ. After months of deadlock, Austria formed its first three-party government since World War II, led by Christian Stocker of the ÖVP and including the SPÖ and liberal NEOS. This new coalition brings to an end the country’s longest government formation process. Austria will hold general elections again in 2029.