Economic output in the East increases slightly in 2024

In their latest analysis of eastern Germany, economists speak of a recovery without momentum. They see a subdued mood in the economy - but more real income and consumption thanks to weakening inflation.

, and James Williams

2023 December 19 . 11:33 AM

2 min read

A worker carries out welding work on a bridge at a construction site. Photo.aussiedlerbote.de

Ifo forecast - Economic output in the East increases slightly in 2024

The Ifo Institute anticipates a moderate economic recovery for eastern Germany in the winter half-year. According to the forecast presented on Tuesday, economic output will increase slightly by 0.8 percent in 2024. "However, the upswing will fall short of expectations from the summer," said the Ifo branch in Dresden. In Germany as a whole, the economic recovery will be slightly stronger at 0.9 percent on an annual average.

The background to this is the subdued mood in the East German economy in 2023 and the resulting lack of momentum among companies. " Inflation is likely to weaken significantly again in 2024, which, together with significantly higher wages, will lead to an increase in the real income of private households," said Ifo economic expert Joachim Ragnitz. This will lead to rising consumer demand, "from which consumer-related services in particular are likely to benefit". However, this development will be less pronounced in the east due to the "unfavorable demographic development".

According to the Ifo assessment, economic output in the East will remain unchanged in 2023, while Germany as a whole will actually lose 0.3%. Weak industry and declining construction demand in particular had a dampening effect on growth, while consumer-related service providers performed better than expected in the summer and thus supported the economy. Recently, the expectations of participants in the Ifo economic surveys have improved again, it was reported.

"Economic development in the past year was disappointing," said Ragnitz. Despite a strong start, the local economy was unable to decouple itself from the dampening effects of the overall German economy over the course of the year. The fact that industry did not shrink even more was due to structural peculiarities such as the reduced importance of the chemical industry, which was affected by sharp declines in production, and the lower export propensity of eastern German companies.

However, positive growth impetus came from new production facilities, including in Brandenburg and Thuringia. However, these will come to an end in 2024, and at 0.1%, the recovery in industry will be weaker than in Germany as a whole, where experts expect 0.5%. And construction will also shrink again. According to the Ifo Institute, the consolidation measures announced as part of the agreement on the federal budget are likely to dampen growth slightly again, by up to 0.2 percentage points. However, this will not change the outlined picture.