Economic environment

While 2021 had seen some dynamic economic development following the easing of the coronavirus measures, the macroeconomic environment in 2022 presented a much more difficult picture. The year 2022 as a whole was characterised in particular by historically high inflation: consumer prices rose significantly more than expected throughout Europe and the USA, with the inflation rate reaching highs of 10.6 per cent in the eurozone and 9.1 per cent in the USA, and even rising to as much as 11.5 per cent in Austria. The main drivers of the high inflation rates were rising commodity and energy prices as a result of the war in Ukraine.

The major global central banks reacted to the high inflation rates with aggressive interest rate hikes. The US Federal Reserve raised its key interest rates in seven stages starting in March 2022 and reaching a level of 4.25 to 4.5 per cent by the end of the year. The ECB began raising its interest rates out of negative territory in July 2022. The deposit rate, which had been at –0.5 per cent since 2019, was raised to 2.0 per cent in four interest rate steps during the year. Both central banks also initiated measures to reduce their total assets. At the beginning of 2023, central banks continued to raise interest rates against a backdrop of falling but still high inflation rates in core areas of the economy. The ECB will also start reducing its bond holdings from the purchase programmes beginning in March.

The energy and commodity price shock in the wake of the war in Ukraine and the restrictive monetary policy dampened growth prospects over the course of 2022. Following solid growth rates in GDP in 2022 (eurozone: 3.3 per cent, Austria: 4.8 per cent, USA: 2.1 per cent), economic momentum is expected to be weak in 2023. However, the economic downturn in the winter of 2022/23 will be mild in the eurozone due to numerous government measures aimed at absorbing the impacts of high rates of inflation.

The labour market has remained resilient since the end of the pandemic. The unemployment rate in Austria fell to 4.8 per cent in 2022, and it fell to 6.7 per cent in the eurozone, the lowest level in decades. In the course of the economic slowdown, a slight increase in unemployment rates is expected for 2023.

The difficult macroeconomic environment and restrictive global monetary policy led to a sharp rise in yields in the eurozone for 2022. The yield on ten-year Austrian government bonds for instance rose from close to 0 per cent to over 3 per cent. Risk premiums within the eurozone also widened noticeably but remained well below the record levels of the euro crisis due to support measures implemented by the ECB and the EU.

For Central and Eastern Europe in 2022, there was a clear decline in economic momentum over the course of the year similar to the situation in the eurozone, with rates of inflation rising sharply at the same time. GDP growth in 2022 was 4.9 per cent in Poland, 2.4 per cent in Czechia and 4.8 per cent in Hungary, in some cases therefore well above the average for the eurozone. However, the rates of price increases in CEE were also higher than in the eurozone. For example, inflation rose to 17.9 per cent in Poland, 18.0 per cent in Czechia and 24.5 per cent in Hungary. Against this backdrop, the national central banks continued the restrictive course to combat inflation in 2022 that had already been adopted in 2021. The last interest rate hikes in 2022 took place in Czechia with an increase to 7.0 per cent, in Poland to 6.8 per cent and in Hungary to 13.0 per cent.