The East German economy has not caught up for five years

Reunification took place decades ago. But the equalization of economic performance is far from complete, as a study shows. What's more: investments are stalling, labor force participation is falling, and the population is shrinking.

The East German economy has not been able to catch up with the West German economy for five years. This emerges from an as yet unpublished study by the German Economic Institute (IW), which is available to the “Rheinische Post”. In 2025, the five eastern German states would reach almost 79 percent of the western level, after a good 78 percent in the previous year. This is shown by new figures from the current IW standard index, which shows the catch-up process since 1990. In addition to economic output per capita, it takes into account productivity development, the economy's capital stock, the proportion of highly qualified people in research and development, labor force participation and the unemployment and self-employment rates.

According to the study, East Germany is falling behind or not making any progress in several indicators. For example, labor force participation is falling. Measured in terms of the total population, the East reached almost 89 percent of the West level in 2010, and in 2025 it would only reach a good 85 percent. Investments have also stalled: in terms of the value of all machines, factories, roads and buildings per inhabitant - i.e. the capital stock - the East has barely caught up for 15 years. In 2010 it was almost 77 percent of the western level, and in 2025 it was a good 79 percent. When it comes to personnel in research and development, the East only has a good 46 percent of the West's level.

The new federal states could also boast notable successes, such as the establishment of the Tesla factory in Grünheide in Brandenburg, Europe's leading chip cluster in Dresden or the expansion of renewable energies. "However, the particularly unfavorable demographic structure makes us pessimistic." According to population forecasts, "the population in the East will shrink by more than a fifth by 2045 in a scenario without immigration - significantly more than in the West," according to the IW.

The eastern German states are therefore even more dependent on skilled workers from abroad than their western neighbors. “The fact that this openness to immigration is in question after the recent election results clouds the outlook,” it says. "And the local economy is also unlikely to receive any tailwind from the proposals of its prime ministers to maintain pensions at 63. "With its population structure, the East is particularly dependent on keeping experienced employees in the job longer," writes the IW.