East Germany's economy is flourishing: forecasts show strong growth!

East Germany's economy is flourishing: forecasts show strong growth!

The East German economy appears in a positive light and is gradually recovering from the challenges of recent years. According to the Dresden Ifo Institute, the region has left the economic low point behind it. An increase in economic output of 0.3 percent is forecast for 2023 and an increase of 1.3 percent for 2024. These developments are primarily supported by planned fiscal measures by the federal government, even if it is said that eastern Germany benefits less from these measures than the western federal states, as the Tagesspiegel reports.

Particularly positive impulses are expected for the construction industry and the service sector, especially in the area of ​​consumer-related services. Nevertheless, it should be noted that the arms industry in the East plays a subordinate role and the planned increase in military spending is unlikely to bring any direct benefits. While East Germany was less dependent on exports in the past, the labor market is currently experiencing stagnating developments.

growth predicted

Interestingly, the East German economy promises stronger growth than the overall German average in the coming years. For 2024, growth of 1.1 percent is forecast in the new federal states, while the overall German economy is expected to grow by only 0.4 percent, according to [Tagesschau](https://www.tagesschau.de/wirtschaft/konjunktur/wir Growth-ostdeutschland-westdeutschland-100.html). This positive outlook is partly due to the pension adjustments and the increase in the minimum wage, which have a greater impact in the East.

Large investments by global players such as Tesla and Intel have been recorded, particularly in Saxony and Brandenburg. Tesla already has over 12,000 employees in Grünheide, which will lead to higher growth rates in the short term. In the long term, it remains to be seen whether these settlements are really sustainable or whether there are simply deadweight effects from government subsidies. A blessing or a curse? The answer to this question depends heavily on the development of the labor market and the population structure.

The labor market is under pressure

The labor market in East Germany is facing major challenges. The Ifo Institute predicts a decline of 0.1 percent for 2025, followed by a marginal increase of 0.2 percent a year later. These stagnating developments are due, among other things, to unfavorable demographic conditions and the existing shortage of skilled workers. The emigration of young people and the aging of the population are further problems that need to be addressed, according to an assessment by [ZDF](https://www.zdfheute.de/wirtschaft/ostdeutschland-wir Growth-Investments-100.html).

In summary, East Germany has experienced remarkable development in recent years, but the region still faces major hurdles. It remains to be seen whether the region can actually act as a driving force for the German economy as a whole. With a share of just 16 percent of Germany's GDP as a whole, the question of long-term competitiveness and the potential for sustainable growth is more relevant than ever.