Rating action

Scope Ratings GmbH (Scope) has today affirmed Austria’s long-term local- and foreign-currency issuer and senior unsecured debt ratings at AA+ and changed the Outlook to Negative, from Stable. The agency has also affirmed the short-term issuer ratings at S-1+ in both local and foreign currency, with Stable Outlooks.

The Outlook change on Austria’s credit ratings reflects:

1. The continued weak fiscal outlook given high fiscal deficits driven by structural pressures, including ageing-related expenditures, which, in the absence of meaningful reforms, will result in a sustained increase in the debt-to-GDP ratio over the medium-term.
    
2. A prolonged period of weak economic growth given a weak recovery and modest growth outlook over the medium term, reflecting long-term impacts of an ageing population, price competitiveness pressures and a challenging external environment.

For the latest rating report, please click here.

Key rating drivers

Weak fiscal outlook given high fiscal deficits driven by structural pressures, leading to a sustained rise in debt-to-GDP

Austria’s public finance outlook has weakened over past years, with the public debt-to-GDP ratio increasing to 81% in 2024, around 10pps above pre-Covid levels. While the debt level is still below its previous peak of 85.6% in 2015, it remains on an upward trend and Scope expects it to reach around 89% by 2030. This marks a significant deterioration in public finances compared to Scope’s baseline assumption at the time of the last rating action in April 2024 when the public debt ratio was expected to remain stable at around 77% by 2029.

Scope expects Austria’s public finances to remain structurally weak over coming years, despite the government’s efforts to consolidate the budget. The Austrian Fiscal Structural Plan for 2025-2029¹ envisages that the deficit will remain on a declining path and reach 3% of GDP by 2028. Critically, given the higher public debt level, Scope estimates that stabilising the debt ratio at current levels would require a headline deficit averaging around 2.5% of GDP each year over the forecast horizon. This would mean a significantly more ambitious fiscal consolidation compared to the path suggested by the medium-term fiscal plan and the scope of the measures so far discussed by the government.

Scope also considers the deficit expectations outlined in the medium-term fiscal plan to appear optimistic in the absence of a significant growth uptick or meaningful additional fiscal measures. In particular, Scope expects slower progress in fiscal consolidation after 2026 as achieving these targets will require structural reforms that still need to be negotiated and agreed with individual ministries, as well as with states and municipalities. Local elections in 2027 also complicate the likelihood of significant fiscal consolidation measures after 2026.

The uncertainty about the size, scope and timing of forthcoming structural reforms and measures supporting the medium-term fiscal consolidation path after 2026 underlines Scope’s decision to assign the Negative Outlook. While the general government deficit should decline from 4.7% of GDP in 2024 to 4.3% in 2025 – driven by government consolidation measures including the abolition of the climate bonus, cuts in subsidies, and increases in taxes and social security contributions – Scope expects the deficit to remain elevated in 2026 at 4.0% and only decline gradually reaching 3.5% by 2030. Stabilising the debt-to-GDP ratio at its high 2024 level of 81.4% over the period of the medium-term fiscal plan would therefore require additional fiscal consolidation of around EUR 38.3bn (7.3% of GDP) until 2029.

Moreover, Scope notes that the near-term pressure for the current government to explicitly reduce the deficit under the European fiscal framework is limited. In response to the weakening public finances, the European Council launched an Excessive Deficit Procedure (EDP) for Austria in July 2025². In line with the medium-term Fiscal Structural Plan, this requires the government to limit nominal net expenditure growth to 2.6% in 2025, 2.2% in 2026 and 2027 and 2.0% in 2028. As long as the net expenditure path is met, the European Commission and Council will consider that Austria has taken effective action to address its excessive deficit. Thus, if weaker-than-expected economic growth, lower-than-expected tax revenues, or exceptional spending in response to future economic shocks were to lead to the deficit remaining above the 3% of GDP threshold, the EDP would likely be extended without additional sanctions being imposed, reducing the institutional incentives to consolidate the budget in coming years.

Structurally, demographic pressures are expected to be the most important driver leading to higher primary deficits³ with a more significant impact than in peer countries such as Finland (AA+/Negative) or France (AA-/Stable). Healthcare and long-term care costs as well as pension spending will increasingly weigh on the fiscal outlook, with Austria’s Fiscal Council calculating that in the absence of reform the budgetary impact would be around 6.2% of GDP by 2070. Similarly, the IMF estimates that the change in Austria’s net present value⁴ of healthcare spending until 2050 is around 40.1% of GDP (Finland: 33.1%; France: 35.1%) and for pension spending at 10.3% (Finland: -9.4%; France: -3.1%). Nearer term until 2030, the European Commission’s latest Ageing Report⁵ also indicates that the impact of demographic pressures is more acute in Austria with total aging costs expected to increase by 1.4% of GDP between 2022 and 2030 compared with Finland (+0.6%) and France (-0.7%).

These pressures suggest that the discussed reforms, including a slightly lower inflation-adjustment to pensions in 2026 than currently foreseen by law (2.7%), only provide a marginal, temporary relief to Austria’s public finances without significantly changing the underlying structural dynamics, underpinning the Negative Outlook.

Weak economic growth outlook and rising pressure on competitiveness

Austria’s economy proved resilient during the immediate aftermath of the pandemic but has weakened significantly since Russia’s war in Ukraine and the accompanying energy, inflation and interest rate shocks. Economic output stood just 1.8% above pre-Covid levels in Q2 2025, a level well below the euro area average of +6.5% and near the bottom of Austria’s peer group alongside Finland (+0.2%). The broad economic slowdown in recent years included weak private consumption, followed by weak investment and net exports with the construction and manufacturing sectors particularly impacted.

Scope expects the economy to stagnate in 2025 after two years of contraction as consumption growth remains muted, while the volatile US trade policy and weak growth in key trading partners weighs on export growth. Real growth is expected to improve to 0.9% in 2026 supported by a gradual strengthening in private consumption, rising investment needs of firms, continued recovery in the construction sector and modest positive effects from Germany’s fiscal expansion. The relatively slow rebound remains below Austria’s moderate medium-term growth potential of around 1% per year, which is constrained by continued demographic headwinds and sluggish productivity growth.

The labour participation rate remains comparatively low in some key demographic segments, curbing Austria’s growth potential. Participation among women has improved in recent years but remains 7pps below men at 74.7% as of Q1 2025. A significant gap to peers is noticeable among those aged between 55 and 65, where Austria (62.0%) remains behind peers such as Finland (78.6%) or the euro area average (69.3%). Further gradual improvements are expected with the increase in women’s statutory retirement age to 65 by 2033 from 60 at YE 2023. The female part-time employment rate is also the second highest in the EU at 50.5% compared with an EU average of 38.2%, which weighs on total labour supply given fewer total hours worked.

Finally, the Negative Outlook is also driven by concerns about Austria’s gradual decline in price competitiveness. Inflation in 2025 remains well above the euro area average, increasing to 4.1% in August (EA 2.1%). As inflation in Austria has significantly exceeded the euro area in recent years, and wages tend to be adjusted by inflation, increases in unit labour cost have significantly outpaced the euro area since early 2023. Austria’s price competitiveness could be undermined over time if inflation convergence does not occur, which could happen if wage growth persistently exceeds the euro area average. Scope expects inflation in Austria to remain elevated at 3.6% in 2025 (EA 2.1%), before falling to 2.2% in 2026 (EA 1.9%).

Rating strengths: wealthy and diversified economy, a robust external position, a sound financial sector, strong debt management and a resilient debt structure

Austria’s AA+ credit ratings are supported by a wealthy and highly sophisticated economy. It has the fifth highest GDP per capita in the euro area (EUR 45,900 in 2024) and strong economic diversification. This is reflected by various indices such as the latest economic complexity index by the Observatory for Economic Complexity⁶, where Austria is ranked 8th (out of a total of 132 countries) globally for trade, 3rd (96) for technology and 12th (137) for research. The diversified economy underpins Austria’s resilience to external shocks.

The external position remains sound and broadly aligned with Austria’s economic fundamentals. External debt is relatively low (162% of GDP as of Q1 2025) while the net international investment position (NIIP) has increased in recent years and stood at a positive 26.2% of GDP as of March 2025, marking a record high. The current account continues to record steady surpluses averaging 1.9% of GDP over 2010-19, and, following the energy-price driven decline to -0.9% over 2021-23, is now expected to average around 2.5% over 2025-30, supporting growth and resilience.

Austria’s banking sector remains stable, liquid, and profitable. Banking system capital has increased in recent years with the Tier 1 capital ratio at 18.5% in Q1 2025 and is now in line with peer countries. Liquidity levels appear adequate (liquidity coverage ratio at 167%) and profitability remains robust, supported by strong interest margins and consistent earnings from operations in Central, Eastern, and Southeastern Europe. However, non-performing loans have increased and remain above peers, mainly due to a rise in commercial real estate (CRE) loan defaults. CRE loans account for around 10% of total bank assets. Still, stress tests suggest the banking system is resilient to adverse shocks in the CRE sector, and provisioning levels remain high by international standards⁷.

Finally, Austria has a highly resilient public debt structure with low financing costs and a long average maturity (12.2 years as of May 2025), mitigating near-term risks from the elevated public debt stock. Despite rising public indebtedness and higher interest rates, net interest expenditure is set to only rise gradually from 1.1% of GDP (2.1% of government revenue) in 2024 to 1.2% (2.3% of government revenue) by 2030.

Rating-change drivers

The Negative Outlook represents the opinion that risks for the ratings are skewed to the downside over the next 12 to 18 months.

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

1. the fiscal outlook improves structurally, resulting in a sustained improvement of the debt-to-GDP trajectory; and/or
    
2. the country’s medium-term economic growth outlook improves significantly.

Downside scenarios for the ratings and Outlooks are if (individually or collectively):

1. the fiscal outlook does not improve structurally, resulting in a sustained increase in government debt;
    
2. the growth outlook weakens, for example, due to losses in international competitiveness; and/or
    
3. financial stability risks emerged, with significant negative implications for the economic and/or public finance outlook.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s Sovereign Quantitative Model (SQM) provides a first indicative credit rating of ‘aa-’ for Austria. This ‘aa-’ first indicative rating receives a one-notch uplift from the SQM’s reserve-currency adjustment and no negative adjustment from the political-risk adjustment. This results in a final SQM indicative credit rating of ‘aa’ for Austria. On this basis, the final SQM quantitative rating of ‘aa’ is reviewed by the Qualitative Scorecard (QS) and can be adjusted by up to three notches depending on Austria’s qualitative credit strengths or weaknesses compared against a peer group of sovereign states identified by the SQM.

Scope identified the following QS relative credit strengths of Austria: i) debt profile and market access; ii) external debt structure; and iii) financial imbalances. Conversely, Scope identified the following QS relative credit weakness for Austria: i) long-term debt trajectory. On aggregate, the QS generates a one-notch positive adjustment affecting Austria’s credit rating, resulting in the final AA+ long-term ratings. A rating committee has discussed and confirmed these results.

Factoring of environment, social and governance (ESG)

Scope explicitly factors in ESG issues in its ratings process vis-à-vis the sovereign-rating methodology’s stand-alone ESG sovereign-risk pillar, which holds a significant 25% weighting under the quantitative model (SQM) and 20% weight under the methodology’s qualitative overlay (QS).

With respect to environmental factors, Austria receives high scores in two SQM indicators. These include carbon emissions per unit of GDP and a high ranking of the ND-GAIN index implying a low vulnerability and high readiness to adapt to climate change. Austria has however a relatively weak mark on emissions per capita and an average score within its peer group for the ecological footprint of consumption compared with available biocapacity. Scope assesses Austria’s QS adjustment for ‘environmental factors’ as ‘neutral’ versus its indicative peer group. Austria has set an ambitious goal of achieving climate neutrality by 2040, a full decade ahead of the EU’s target. Between 2005 and 2023, the country reduced its greenhouse gas emissions by 25% (EU average reduction of 30%). The majority of emissions reductions have occurred in the emissions trading sector, while land use and forestry, historically a carbon sink, have seen declines, even resulting in net emissions in 2018 and 2019. Austria met its 2020 targets but must significantly increase efforts to meet updated 2030 obligations. A public consultation was held in 2023 on Austria’s new National Energy and Climate Plan, but delays in submission resulted in infringement procedures⁸.

Regarding social criteria, in the SQM model Austria receives high scores on income inequality and labour force participation, and a weak mark on the old-age dependency ratio in line with most peers. The complementary QS assessment of ‘social factors’ is assessed at ‘neutral’. This reflects a low rate of people at risk of poverty or social exclusion of 16.9%. Challenges relate to a comparatively lower labour-force participation rate of 62% of those aged 55-64 (vs. 69.3% in the euro area) and an ageing society weighing on growth and fiscal prospects.

Finally, under governance factors captured in Scope’s SQM, Austria performs very strongly as measured by the World Bank’s Worldwide Governance Indicators. Austria has a robust track record of a stable political environment despite a recent increase in political turnover. The current ruling coalition comprises the conservative Austrian People’s Party (ÖVP), the center-left Social Democrats (SPÖ) and the liberal Neos party. The coalition agreement involved a budget compromise that attempts to balance fiscal consolidation with investment in social welfare and economic growth.

Rating committee
The main points discussed by the rating committee were: i) public finance risks and budgetary outlook; ii) domestic economic risk, medium-term growth prospects; iii) external risk; iv) financial stability risk; v) ESG factors; and vi) peer developments.

Rating driver references
1. Ministry of Finance, Austrian Fiscal Structural Plan for the Years 2025-2029, May 2025 
2. Council of the European Union, Council Decision on the existence of an excessive deficit in Austria, July 2025 
3. Fiskalrat, Fiscal Sustainability Report 2025, April 2025 
4. IMF, Fiscal Monitor, April 2025 
5. European Commission, 2024 Ageing Report, April 2024 
6. Observatory of Economic Complexity, Economic Complexity Index 
7. IMF, 2025 Article IV Consultation, July 2025 
8. European Parliament, Austria’s climate action strategy, December 2024 

Methodology
The methodology used for these Credit Ratings and Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and Outlooks is (Sovereign Quantitative Model Version 4.1), available in Scope Ratings’ list of models, published under scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation   YES
With access to internal documents                                YES
With access to management                                          YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Eiko Sievert, Executive Director
Person responsible for approval of the Credit Ratings: Alvise Lennkh-Yunus, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Credit Ratings/Outlooks were last updated on 26 April 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.