Projected Deficit for 2025 Expected to Reach 4.5 Percent

The Austrian Ministry of Finance has projected a budget deficit of 4.5 percent of GDP for the current year, a figure that will be formally submitted to Statistics Austria for reporting to the European Union. This anticipated deficit exceeds the EU's allowable threshold of 3 percent, indicating that Austria may be subject to an EU deficit procedure. Notably, this forecast is slightly below the 4.7 percent recorded in 2024.

According to the Ministry's estimates, the deficit breakdown for 2025 is as follows: 3.5 percent attributed to the federal government, and 1 percent to states and municipalities, while social insurance is expected to balance nearly evenly. This estimate from the Finance Ministry is marginally higher than the Fiscal Council's recent projection of 4.4 percent of GDP.

The Ministry also anticipates a debt-to-GDP ratio of 84.7 percent, aligning with the Fiscal Council's earlier forecast. The government has yet to finalize assumptions for the upcoming year, which are expected to be revealed during the presentation of the dual budget in mid-May.

The fiscal forecast is built on the Ministry's internal budget monitoring, tax revenue estimates, and financial projections from states, municipalities, and social insurance systems. This estimate also accounts for planned consolidation measures by the government. Without these measures, the deficit could exceed 5 percent.

Key factors influencing the projected deficit include a persistently weak economic climate, which has resulted in declining revenue from economic-dependent taxes such as corporate tax, alongside rising expenditures due to increased unemployment. Additionally, higher interest costs and previously agreed expenditure increases from the previous administration are also contributing factors.

The Finance Ministry assumes that based on these figures, a EU deficit procedure will likely be initiated, with a decision expected in July during the Economic and Financial Affairs Council (Ecofin) meeting. Finance Minister Markus Marterbauer has reiterated his commitment to maintaining a consolidation strategy through agreed-upon savings in the dual budget for 2025/26, emphasizing the importance of not overburdening economic growth and employment. A balanced approach involving savings, tax increases--such as those targeting banks--long-term reforms, efficiency improvements, and proactive measures is essential.

Efforts are underway to diligently finalize the budget, with a budget speech scheduled for May 13 and a vote on the dual budget set for June. The consolidation package remains unchanged at EUR6.4 billion for this year and EUR8.7 billion for 2026.

NEOS leader Yannick Shetty has expressed concerns that even significant savings efforts will not be sufficient to sustainably stabilize Austria's finances. He stressed that as the economy recovers, there should be no return to previous structures and mechanisms that contributed to the current crisis, urging a comprehensive search for additional savings opportunities across all levels of government.

Green Party budget spokesman Jakob Schwarz warned against hasty savings measures that could harm both climate initiatives and the economy. He emphasized the necessity for targeted investments in the future, rather than detrimental cuts.

The dramatic rise in the budget deficit is attributed not only to sluggish economic growth but also to structural challenges, including expansive financial demands from state and municipal budgets.