Ifo forecast - Economic output in the East increases slightly in 2024
The Ifo Institute expects 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. "Things will improve next year," said Joachim Ragnitz, deputy head of the Ifo Dresden branch, on Monday. "However, the upturn will fall short of expectations from the summer, but at least it will be a recovery," the Ifo branch in Dresden announced. In Germany as a whole, the economic recovery will be slightly stronger at an annual average of 0.9 percent.
According to the information, the background to this development is a 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 Ragnitz. This will lead to rising consumer demand, "from which consumer-related services in particular are likely to benefit". In the east, however, this development will be less pronounced 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%. The weak construction industry in particular had an unfavorable impact due to high construction prices and uncertainty among potential builders, as Ifo expert Ragnitz explained. The sector will continue to dampen the economy in the coming year. After a decline of minus 2.1 percent this year, he predicts minus 3.6 percent for 2024. However, this will be offset in particular by consumer-related service providers such as retail, hospitality and transport. According to Ragnitz, these sectors are performing better than expected in the summer and are therefore supporting the economy.
"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 lower significance of the chemical industry, which was affected by a sharp decline in production, and the lower export propensity of eastern German companies.
However, positive growth impulses are reportedly coming from new production facilities, including in Brandenburg and Thuringia. However, these will come to an end in 2024 and the recovery in the industry will be weaker at 0.1 percent than in Germany as a whole, where experts expect 0.5 percent. According to the Ifo Institute, the consolidation measures announced as part of the agreement on the federal budget are likely to dampen growth again slightly, by up to 0.2 percentage points. However, according to Ragnitz, this will not change the picture outlined above. "We don't yet know what the specific savings plans will look like."
Press release with data
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Source: www.stern.de
