East Germany is hardly catching up in the economic catch-up process

According to a study, East Germany has recently barely caught up in terms of bringing its economy into line with the level in the west of the Republic. This emerges from an unpublished study by the German Economic Institute (IW), as the “Rheinische Post” reported in its Saturday edition. In 2025, the five eastern German states reached almost 79 percent of the western level, after a good 78 percent in the previous year. Individual indicators of economic development have even been declining for years.

The newspaper referred to figures from the IW uniform 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.

See F.A.Z. articles more often in your search results

F.A.Z. prefer on Google

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.

“Unfavorable demographic structure”

Investments have also stalled: in terms of the value of all machines, factories, roads and buildings per capita - 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,” the “Rheinische Post” quoted from the study. 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”.

The fact that openness to immigration with regard to skilled workers “is in question following the recent election results clouds the outlook,” it said. “And the local economy is also unlikely to receive any tailwind from the proposals of its prime ministers to maintain the 'pension at 63'.” Because of its population structure, “the East is particularly dependent on keeping experienced employees in their jobs for longer.”