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VIENNA, Dec 9 (Reuters) - The Austrian central bank forecast on Tuesday that the country's economy would shrink 0.3 percent next year before staging a slight recovery in 2010.
Next year's contraction would be only the second since World War II and is expected to be more prolonged than the first in 1975, which was due to the oil crisis.
In June, the Austrian central bank had forecast growth of 2.2 percent this year, 1.7 percent next year and 2.4 percent in 2010. It now expects growth this year of 1.6 percent and 0.8 percent in 2010.
Inflation next year is now forecast at 1.4 percent, down from a previous 2.4 percent. For 2010, the central bank sees inflation at 1.6 percent, reduced from 1.9 percent.
"As a consequence of the global downturn there is now a very serious situation for the Austrian economy," central bank chief Ewald Nowotny said in the bank's economic outlook.
The bank said that exports are expected to rise 2.5 percent this year but will decline 2.7 percent next year before posting growth of 2.1 percent in 2010.
Austrian growth slowed to 0.1 percent quarter-on-quarter in the third quarter, mainly because exports fell 0.3 percent. Austria's main trade partner, Germany, is in recession and growth is slowing down in another major export destination, the emerging economies of central and eastern Europe.
Germany's economy, which takes 30 percent of Austrian exports, shrank 0.5 percent quarter-on-quarter in the third quarter and its final three months are not expected to be much better.
Austria rode an export-driven mini-boom in 2006 and 2007, when the economy grew 3.1 and 3.4 percent respectively. This was significantly more than the euro zone average, helped by a then buoyant German economy and trade with the neighbouring countries in emerging Europe.
Exports to central and eastern European countries rose 15 percent in the first nine months of this year and after years of strong growth, they now account for 23 percent of Austria's exports.
Austria could now have its worst two consecutive years of growth in more than half a century, the country's biggest commercial bank said last month as its economic sentiment index plummeted to the lowest in its 10-year history. Austria accounts for 3 percent of total euro zone GDP.
(Reporting by Boris Groendahl; editing by David Stamp)