Eastern German Economy Is Recovering
Things are looking up for the economy in eastern Germany and Saxony, where growth will reach 2.4 and 3.1 percent in the current year (Germany: 3.3 percent). “We expect the economy to recover quickly and strongly,” says economic expert Joachim Ragnitz from the ifo Institute’s Dresden Branch. “The economic recovery should be complete by the end of 2021.”
This is because the economy is expected to return to strong growth as more and more coronavirus restrictions are lifted; however, due to the long closures in the winter half-year, the forecast for 2021 is somewhat weaker than it was in December.
In 2022, economic output in eastern Germany is likely to be 3.6 percent higher year over year; in Saxony, gross domestic product will increase by 3.9 percent (Germany: 4.3 percent).
In the first quarter of 2021, development was subdued as a result of ongoing coronavirus measures, particularly among service providers. As these measures expire, a strong recovery will begin in the third quarter.
“By 2022, the coronavirus should no longer be affecting the German economy,” Ragnitz says. Growth ought to then return to normal in all sectors. Supply bottlenecks for construction materials, microchips, and other goods should also disappear next year.
Healthy growth in 2022 will predominantly result from the strong increase in economic output in the second half of 2021, the momentum from which also has a positive effect on the forecast for the coming year. The ifo Institute expects the number of people in employment in eastern Germany to grow by just under 12,000 in the current year, nearly 2,000 of them in Saxony (0.1 percent in each case). Employment is expected to increase again significantly in 2022 – by 98,000 and 25,000, respectively (1.2 percent in each case).
