ifo Economic Forecast Eastern Germany and Saxony

The East German economy is growing more strongly than Germany as a whole. Its output is expected to increase by 1.1% in 2024, significantly more than in Germany as a whole (0.4%). Growth in Saxony is likely to be 0.4% and thus as strong as Germany as a whole, but lower than the average for Germany’s eastern states. Even the development in the first quarter of the current year was positive, whereas it was sluggish in Germany as a whole. “We are seeing strong growth in eastern Germany, particularly among consumer-related service providers; at the same time, manufacturing here is less affected by production cutbacks,” says Joachim Ragnitz from the Dresden Branch of the ifo Institute. “That means eastern Germany will probably grow more strongly this year.” In Saxony, however, manufacturing and construction are weighing on the overall result.

Economic output in eastern Germany and Saxony will increase slightly in 2024, by 0.8 percent and 0.7 percent respectively. This means the upturn remains below the level expected in the summer. In Germany as a whole, the economic recovery will be slightly stronger at an annual average of 0.9 percent.

The economy in eastern Germany and Saxony, like that in Germany as a whole, entered a weak phase at the turn of 2022–2023. Eastern Germany’s economic output in 2023 is likely to be 0.4% below the previous year’s level; in Saxony, the ifo Institute expects GDP to contract by 0.2% (Germany: −0.4%). This is despite a trend toward recovery over the further course of the year. Next year, economic output in those regions will grow again slightly by 1.3 and 1.2%, respectively (Germany: +1.5%).