Structural Nature of Rising Public Spending, Inflation Complicates Efforts to Tighten Expenditure Controls
Growth in Austrian public spending last year (up 8.7% from 2023) continued to surpass increases in revenue (up only 4.9%) as higher welfare and public-sector wage costs offset the phase-out of most measures designed to protect households and businesses from the cost-of-living crisis.
Austria’s budgetary challenge partly stems from fiscal slippage at the provincial and local levels. Planned consolidation over 2025–2026 relies mainly on cuts to state, local and social security budgets; the central government’s deficit is expected to remain stable. However, sub-sovereign governments also face fiscal pressures, notably from high staffing costs.
Structural spending related to Austria’s ageing population represents longer-term pressures on public finances, the response to which will require streamlining healthcare services and further pension reform. The government estimates that pension costs will rise to EUR 38.2bn (6.7% of GDP) in 2029 from EUR 30.0bn (6.2% of GDP) in 2024.
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Eiko Sievert is an Executive Director in Sovereign and Public Sector ratings at Scope Ratings. Elena Klare, analyst in sovereign ratings at Scope, contributed to drafting this research.
