IFO: Economy in eastern Germany growing at an above-average rate
Overall, the economic situation in Eastern Germany is improving, according to a study by the IFO Institute. The IFO Institute predicts that the economy in Eastern Germany will grow at an above-average rate in the next few years. In 2024, a growth of 1.1% is expected, and in 20225, a growth of 1.7% is predicted. However, the study by the German government shows that living conditions in Germany as a whole are becoming more equal. Structurally weak regions are still facing major challenges, according to a report by the traffic light coalition government in the 400 districts and free cities. "This can lead to a weakening of the labor force base, the economic situation, and municipal budgets," the report states further.
The IFO Institute predicts a growth of only 0.4% for Germany as a whole in 2024, and the highest estimates from economists currently stand at around 1.5%. "We see strong growth in consumer services in Eastern Germany, while the industry here is less affected by production restrictions," said IFO expert Joachim Ragnitz.
The state of Saxony is feeling the problems of the industry and construction sector more strongly than other Eastern German states, according to Ragnitz. Here, the same growth rate is expected as in the entire country this year.
Out of 38 indicators for measuring equal living conditions, 27 have improved in recent years. For example, in the areas of life expectancy, unemployment rate, and municipal tax revenue, regional differences have become smaller. However, differences between regions have increased in seven areas such as the proportion of single-person households or housing density. No clear trend could be identified for four indicators.
The study included over 31,000 individual interviews to measure the subjective satisfaction of citizens on site. In general, satisfaction with life is predominantly high: almost two-thirds of those surveyed for the report are either rather or completely satisfied with their current living situation. However, dissatisfaction prevails, for example, in the areas of healthcare and care or the topic of housing.
41% of those surveyed believe that the healthcare and care services have deteriorated in the last five years, while only 5% see an improvement. More than eight out of ten interviewees find it very (42%) or rather (41%) difficult to find affordable housing on site.
In 2022, funding of 4.2 billion Euro (without guarantees and loans) flowed into structurally weak regions. More than half of this went to Eastern German districts. In Western Germany, the Ruhr area, parts of Rhineland-Palatinate, the Saarland, and districts along the Bavarian border with the Czech Republic were among the beneficiaries.
Assessing were the 19 different funding programs of the German federal government for structurally weak regions. Therefore, the report is also a "monitoring of our own work," according to Habeck. Conversations with various regional actors have shown that there is still improvement potential in the programs, said Federal Interior Minister Nancy Faeser. These must be "more flexible and less bureaucratic" in design. The traffic light government is implementing this project from the coalition agreement with the creation of the report. Equal and good living conditions throughout Germany are important for cohesion, emphasized Faeser.
The Ifo Institute's economic forecasts for East Germany are quite optimistic, predicting an above-average growth rate of 1.1% in 2024 and 1.7% in 2025. despite the positive outlook for Eastern Germany, the Ifo Institute only forecasts a growth of 0.4% for Germany as a whole in 2024. The differences in living conditions between regions in Germany have decreased in some areas, such as life expectancy and municipal tax revenue, but have increased in others, like the proportion of single-person households, according to the study.
