Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Republic of Austria (local- and foreign-currency long-term issuer and senior unsecured debt ratings: AA+/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 31 March 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

Austria’s AA+ ratings reflect: i) a wealthy, resilient and diversified economy; ii) a strong external position with low private sector indebtedness; iii) a sound banking sector; and iv) a highly resilient public debt structure with low financing costs and a long average maturity, mitigating risks from a comparatively elevated public debt stock.

The ratings are constrained by: i) a high and rising public debt stock relative to other highly-rated peers; ii) persistent budgetary pressures, with rising pension and healthcare costs absent structural reform; and iii) a subdued economic growth outlook.

Austria’s credit ratings continue to be anchored by the country’s wealthy and diversified economy. At the same time, Scope expects a third consecutive year of economic contraction in 2025, with projected real growth of -0.2%, after contractions of 1.2% in 2024 and 1.0% in 2023. Output growth should resume from H2 2025, with expected growth of around 1% in 2026 and subsequent years. Downside risks to growth persist, with US tariffs on EU exports further dampening external demand. Still, some upside potential could materialise from Germany’s significant fiscal loosening potentially raising near- and medium-term growth prospects for Austria.

Scope expects budgetary pressures to persist over the coming years, despite planned net consolidation efforts of EUR 6.4bn (1.3% of GDP) in 2025 and another EUR 2.3bn (0.5% of GDP) in 2026 committed by the three-party coalition government formed in March 2025. Still, the general government deficit of 4.7% of GDP in 2024 far exceeds the government’s initial projection of 2.9% as well as Scope’s previous estimate of 3.3%. Despite this deterioration, additional consolidation efforts beyond the measures announced over the 2025-26 period appear challenging, not least given their expected adverse impact on growth. As a result, Scope expects the 2025 deficit to exceed the 3% Maastricht limit, which will likely lead to an opening of an excessive deficit procedure.

Absent an ambitious medium-term fiscal consolidation path, including material reforms to Austria’s pension system, healthcare and long-term care given its ageing population as well as simplifications to its complex inter-governmental fiscal relations, Scope expects the fiscal deficit to remain between 3.5-4.0% of GDP in coming years. The latest government long-term budgetary forecasts, published in 2022, highlight that expenditures on pensions, healthcare and long-term care are projected to increase by about 1pp of GDP between 2025 and 2030. Similarly, the IMF estimates that implementing reforms in the healthcare and pension system, such as partially linking the statutory retirement age to life expectancy, could realise cost savings of 1.4pp of GDP by 2030. Finally, additional budgetary pressure stems from the government’s target to raise defence spending to 2.0% of GDP by 2032 from around 1.0% in 2024 (although Austria is not a NATO member).

Unless the government undertakes additional reform efforts to stabilise and reverse the public debt trajectory, Austria’s public finances will continue to weaken. Absent additional consolidation measures, the debt-to-GDP ratio would increase from 81.8% at end-2024 to around 87.5% by 2029, which would be credit negative should this trajectory materialise. At the same time, Austria’s public finances and credit profile continue to benefit from a highly resilient public debt structure, including an exceptionally long average debt maturity (11.71 years) and a high share of fixed-rate debt (over 90% of total).

The Stable Outlook reflects Scope’s view that the risks Austria faces over the next 12 to 18 months are balanced.

Upside scenarios for the long-term ratings and Outlooks are (individually or collectively):

1. the fiscal outlook improved materially, for example, via structural improvements in the government budget balance and a steady decline in the debt-to-GDP ratio;
    
2. medium-term growth prospects strengthened substantially.

Downside scenarios for the long-term ratings and Outlooks are (individually or collectively):

1. the fiscal outlook weakens, leading to a steeper trajectory in the debt-to-GDP ratio;
    
2. the growth outlook weakens, for example, due to losses in international competitiveness;
    
3. financial stability risks emerged, with significant negative implications for the economic and/or public finance outlook.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Julian Zimmermann, Director
 
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