The government should cut spending to combat current challenges which include costs relating to COVID-19 which continue to be felt and exacerbated by rising costs, states the fiscal advisory council.
The advisory council was founded in 2013 and functions as an independent supervisory body per EU rules. Its annual forecast cautioned against continued high government spending, although budget deficit and government debt are set to sink.
“To regain fiscal policy room for manoeuvre, it is essential to scale back expansionary fiscal policy in line with the economic cycle as well as to reduce temporary support payments as planned,” explained Christoph Badelt, president of the fiscal council.
This means that Vienna must cut generous industry support and expensive gas shopping sprees – necessitated by the country’s overt dependence on Russia.
The projected budget deficit for 2022 is expected to be at 2% of GDP, down from 3.2%, despite the troubled economic outlook. This was attributed to robust labour market growth, a post-pandemic consumption uptick, lifted restrictions and windfall taxes on energy companies. In 2020, the deficit sat at 8% of GDP.
Anti-inflation measures came in at a price tag of €24.1 billion, topping 2021’s level of state fiscal intervention. The advisors call for a “comprehensive concept” to work towards stabilising public finances and financing the crisis interventions.
Austria can breathe a sigh of relief: the EU budget rules and the Maastricht criteria will again be met in 2023. Yet, this is mainly due to inflation inflating nominal GDP growth.
The advisors urged the government to increase investments in future economic sectors, particularly green and digital, and boost education and job training. Similarly, they stressed the need for structural reforms – untangling the messy web of financing and tasks given to local authorities – “should be accelerated.”
(Nikolaus J. Kurmayer | EURACTIV.de)
Source: euractiv.com
