ifo Economic Forecast for Eastern Germany and Saxony Winter 2021: Coronavirus Puts the Brakes on Recovery
The coronavirus pandemic has slowed the economic recovery in eastern Germany and Saxony. In the current year, economic output in those regions will grow by 2.6 and 2.7 percent respectively (Germany: 2.5 percent). In 2022, economic output in eastern Germany is likely to be 3.2 percent higher year over year; in Saxony, gross domestic product will increase by 3.4 percent (Germany: 3.7 percent).
“Economic development in 2021 continued to be affected by the coronavirus pandemic. Another factor now at play is the increasing supplier bottlenecks in several economic sectors,” says economic expert Joachim Ragnitz from the ifo Institute’s Dresden Branch. “This has put the brakes on the economic recovery that we were still expecting this past summer.” Pandemic-related restrictions on public life inhibited contact-intensive service providers and supply bottlenecks caused delays in manufacturing and construction. However, government aid for companies affected by the pandemic had a supporting effect.
“As we head into 2022, the coronavirus pandemic will probably continue to have a dampening effect,” Ragnitz explains. “But experience has shown that, once restrictions are removed, the economy recovers quickly from the crisis.” All sectors of the economy are expected to expand significantly again next year, contributing to strong economic growth. This is likely to be somewhat lower in eastern Germany than in the country as a whole, as the east is less involved in international goods trade.
The labor market is recovering only slowly from the crisis. The ifo Institute expects the number of people in employment in eastern Germany and in Saxony to hold steady in the current year (0.0 percent change in each case). However, employment is expected to grow again somewhat in 2022, with the workforce growing by 48,000 and 12,000 people respectively (both +0.6 percent).
