Austria's economy is expected to nearly stagnate this year, pressured by a weaker European Union economy and higher interest rates, according to two leading economic institutes which cut their 2024 forecasts on Friday.

"The upturn originally expected for the beginning of 2024 is delayed," WIFO economists said, adding higher interest rates will weigh on investments and construction demand.

WIFO forecast 0.2% economic growth this year, while the IHS institute forecast 0.5%, down from their October guidance of 1.2% and 0.9% growth, respectively.

Both WIFO and IHS saw a return to moderate growth in the second half of 2024 provided the European Central Bank (ECB) starts the monetary easing cycle, with a stronger pick-up expected only in 2025.

In 2025, WIFO expects the Austrian economy to grow by 1.8%, while IHS guided for a 1.5% pick-up.

Europe is grappling with a real estate rout as higher interest rates and building costs hit the sector, especially in the region's biggest economy Germany.

WIFO said it expects inflation in Austria to slow to 3.8% this year, from 7.8% last year, and sink further to 2.7% in 2025.

IHS guided for inflation this year of 3.5%, dropping to 2.6% next year.

(Reporting by Andrey Sychev, Editing by Rachel More)