Thuringia on the way to economic recovery: growth in sight!

Thuringia on the way to economic recovery: growth in sight!

A rising star in the economic sky: Thuringia is finally showing signs of recovery after two gloomy years. According to [Stern](https://www.stern.de/gesellschaft/regional/thueringen/wir Growth–thueringen-holt-beim-wir Growth-etwas-auf-36075726.html), the federal state achieved real economic growth of 0.6 percent in the first half of 2023. This positive news comes from preliminary surveys by the State Statistical Office in Erfurt and follows a previous decline of 1.3 percent in the first half of 2022. While no price-adjusted growth in gross domestic product (GDP) was recorded nationwide, Thuringia is showing encouraging stabilization.

Despite this progress, there are still challenges to overcome. In the five eastern German states, real growth was only 0.1 percent, which is slightly above the previous year's level. Thuringia is currently in the top midfield in terms of GDP growth compared to other federal states, such as Bremen, Berlin, Hamburg, Mecklenburg-Western Pomerania and Lower Saxony, which performed significantly better. After all, strong federal states such as Baden-Württemberg and Bavaria have to cope with slightly negative growth.

Economy in transition

Thuringia's economic landscape has some structural problems that still need to be solved. The automotive supply industry and the construction industry in particular continue to struggle with sales problems that could jeopardize the recovery. There are currently around a million people working in the Free State, which provides a solid basis in terms of workforce.

But what awaits us in the future? An assessment by the Ifo Institute shows that the East German economy is expected to grow faster than the German economy as a whole in 2024 and 2025. Growth of 1.1 percent is forecast for 2024 and even 1.7 percent for 2025 in the new federal states, while the overall German economy is lagging behind at 0.4 percent and 1.5 percent, as [Tagesschau](https://www.tagesschau.de/wirtschaft/konjunktur/wir Growth-ostdeutschland-westdeutschland-100.html) reports.

Positive impulses through domestic consumption

The reason for these optimistic prospects lies in the East German economy's greater focus on domestic consumption. Higher growth in consumer-related service providers and greater pension adjustments in the East are promoting citizens' purchasing power. With a pension increase of 5.86 percent in the East compared to 4.39 percent in the West, economic opportunities are also increasing. However, future pension adjustments could change the tension, as these should be the same in East and West.

The settlement of large companies such as Tesla, Intel and TSMC in East Germany gives the whole thing additional momentum. While there is excitement about the creation of new jobs, the long-term effects of these settlements are still uncertain, particularly when it comes to subsidies.

With regard to employment, it is crucial to further strengthen the workforce potential. A focus on reducing school drop-out rates and integrating migrants into the labor market could help promote innovation. The share of the new federal states in the overall German GDP is currently 16 percent - a value that shows that the East German economy does not act as a motor of the overall German economy, but rather represents a dependent component.

It remains exciting for Thuringia to observe the next steps and to continue to closely follow developments on the path to economic recovery. If the positive trends continue, the state could make even more use of its potential in the near future and the economic rise will continue to gain momentum.