VIENNA, March 22 -- The Austrian Institute of Economic Research (WIFO) said on Friday that it expects the country's economy to stagnate this year amid high interest rates and the European economic downturn.

According to WIFO's latest predictions, Austria's GDP is expected to grow by only 0.2 percent in 2024, far below the institute's projection of a 0.9-percent growth in December.

"The economic weakness in the European Union (EU) is particularly affecting Germany and Austria, which are specialized in capital goods production," WIFO said in a statement. "The high interest rates are weighing on investment demand as well as demand for construction services."

The institute on Friday projected economic activity in Austria and the euro area to pick up from mid-2024, with expected eased monetary policy around that time.

WIFO expected Austria's GDP growth to rise to 1.8 percent in 2025, also more bearish than its 2-percent growth prediction in December.

Inflation in the country is projected to fall from 7.8 percent in 2023 to 3.8 percent this year and 2.7 percent next year, according to the institute.

Official figures showed that Austria's GDP shrank by 0.8 percent in real terms in 2023 compared to 2022, burdened by declining output from manufacturing, trade and transportation sectors.

  - Xinhua