Economic environment
The general economic weakness of the Eurozone continued in the 4th quarter of 2023. In a first estimate, growth stagnated in the 4th quarter of 2023 (0.0% compared to the previous quarter). Thus, real GDP growth for 2023 was 0.5% year-on-year. Weak developments both in consumption and investment significantly contributed to it. In December 2023, sentiment among service providers weakened again slightly from a low level. Industry sentiment stabilised at an even lower level for now.
In the 4th quarter of 2023 consumer prices (Harmonised Consumer Price Index, HCPI) rose by 2.7% year-on-year in the Eurozone. A diminishing base effect of energy prices led to a certain deceleration of the disinflationary trends. Overall the inflation rate of consumer prices for 2023 was 5.4% year-on-year in the Eurozone. According to the quick estimate by Statistics Austria, the Austrian GDP in the 4th quarter 2023 fell by 1.3% year-on-year. The slight increase of 0.2% compared to the previous quarter – reflected by a positive development in investments and in government consumption in the 4th quarter – was the first indication of stabilisation. Overall, the strongly subdued economy resulted in a negative real GDP growth of -0.7% for the entire year of 2023.
The HCPI-inflation still increased to 5.7% year-on-year in December 2023, which is 0.8 percentage points more than in November 2023. Analogous to the Eurozone, this is also attributable to the diminishing base effect of the energy prices. For the entire year 2023, the HCPI inflation for Austria was 7.7%. Central and Eastern Europe was not able to significantly decouple from the general economic trend in 2023. Croatia and Romania grew dynamically for much of the year. In both these countries private consumption actually increased in the first half of 2023 in contrast to the rest of the region. The Czech Republic and Hungary are expected to end 2023 in recession, mainly due to weak domestic demand caused by high inflation and the resulting tight money policy. Overall, the region reported a real GDP growth of 0.6% year-on-year, whereby Hungary (-0.9%) and the Czech Republic (-0.4%) mark the lower end, Croatia (2.4%) and Serbia (2.5%) as well as Romania (2.0%) mark the upper end.
Support by external factors such as, for example, energy prices disinflationary trends were strong in the region over the course of 2023. Nevertheless, this could not prevent the region from being among the leaders in the EU’s inflation expectations for 2023. The average inflation rate in the region in 2023 was 11.6% year-on-year, with Hungary having by far the highest rate at 17.6%.