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AUSTRIA: Govt Plans Could Support Debt Reduction Over Medium Term: Fitch

AUSTRIA
AustriaEurozoneBulletMarketsFixed Income Bullets

Fitch Ratings write that the new Austrian government’s fiscal plans demonstrate “commitment to EU fiscal rules and could support debt reduction over the medium term, if implemented as planned”. Some highlights from the write-up (here: https://www.fitchratings.com/research/sovereigns/austrias-new-government-fiscal-consolidation-may-support-debt-reduction-07-03-2025)

  • “When we placed Austria on Negative Outlook [in January], we projected the deficit would worsen to 4.0% of GDP this year in the absence of a new government or fiscal consolidation measures”….“ The announced savings measures could help reduce the deficit to below 3% of GDP in 2025 and below 2% in 2026”.
  • “To return the Outlook to Stable, we would need to see the implementation of a credible fiscal consolidation plan that puts general government debt/GDP on a clear downward path over the medium term, in line with the positive rating sensitivity set out at our January review”
  • “The wider economic outlook is uncertain, as potential US tariffs could hurt growth, while higher fiscal spending in Germany (Austria’s largest trading partner) may provide a boost”.
  • “However, the new government has postponed any large relief and investment packages until budget conditions improve, with potential tax relief measures not envisaged until 2027”.
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Fitch Ratings write that the new Austrian government’s fiscal plans demonstrate “commitment to EU fiscal rules and could support debt reduction over the medium term, if implemented as planned”. Some highlights from the write-up (here: https://www.fitchratings.com/research/sovereigns/austrias-new-government-fiscal-consolidation-may-support-debt-reduction-07-03-2025)

  • “When we placed Austria on Negative Outlook [in January], we projected the deficit would worsen to 4.0% of GDP this year in the absence of a new government or fiscal consolidation measures”….“ The announced savings measures could help reduce the deficit to below 3% of GDP in 2025 and below 2% in 2026”.
  • “To return the Outlook to Stable, we would need to see the implementation of a credible fiscal consolidation plan that puts general government debt/GDP on a clear downward path over the medium term, in line with the positive rating sensitivity set out at our January review”
  • “The wider economic outlook is uncertain, as potential US tariffs could hurt growth, while higher fiscal spending in Germany (Austria’s largest trading partner) may provide a boost”.
  • “However, the new government has postponed any large relief and investment packages until budget conditions improve, with potential tax relief measures not envisaged until 2027”.