Forecast - East German economy grows faster than the German economy as a whole
The eastern German economy is expected to grow more strongly than the economy as a whole in Germany this year, according to a forecast by the Dresden Ifo Institute. "Their performance is expected to increase by 1.1 percent in 2024, significantly more than in Germany as a whole (0.4 percent)", the institute in Dresden stated. "We see strong growth in consumption-oriented services in Eastern Germany; at the same time, the industry here is less affected by production restrictions", says economist Joachim Ragnitz.
According to the Ifo Institute, growth could continue to gain momentum in the coming year. In total, the real Gross Domestic Product in Eastern Germany is expected to increase by 1.7 percent, in Germany by 1.5 percent. Saxony is recorded with a value of 1.4 percent. The institute assumes that with a growing world market, falling interest rates, declining inflation, and rising real wages, the local industry will also grow. The additional income earned is expected to flow into consumption, Ragnitz explained. Service providers are also expected to make a significant contribution to growth next year.
Ragnitz stated that the German economy is gradually emerging from a weakness phase with slight shrinkage in the previous year. However, he assesses the labor market situation as "poor". It is expected to improve only slightly according to the forecast in this year. Eastern Germany can expect an increase in the number of employed persons of 0.2 percent. However, the labor market is expected to stagnate next year, not least due to the unfavorable demographic development, it is stated.
Joachim Ragnitz, an economist, mentioned strong growth in consumption-oriented services in Eastern Germany, specifically in Saxony. The Ifo Institute, based in Dresden, forecasted a 1.7% increase in the real GDP of Eastern Germany for the next year, higher than Saxony's expected 1.4%. Despite the improvement in the overall German economy, as per Ragnitz, the labor market situation remains poor, with only a slight improvement expected this year. Eastern Germany, however, is projected to see a 0.2% increase in employed persons, although the labor market is expected to stagnate next year due to demographic challenges.
Ragnitz also highlighted that Brandonburg and Thuringia, other regions in East Germany, are also expected to contribute to the economic growth. He suggested that the local industry could benefit from a growing world market, falling interest rates, declining inflation, and rising real wages. Joachim Ragnitz further explained that the additional income earned is likely to flow into consumption, which will significantly contribute to growth in service sectors.
The economic forecast for Saxony-Anhalt, another eastern German state, was not explicitly mentioned in the text, but given the focus on East Germany as a whole, it can be assumed that the economic situation in Saxony-Anhalt may also show positive trends, aligning with the forecast for Germany as a whole.
