Implications of the Joint Economic Forecast Autumn 2026 and official regional data for the East German economy
In 2026, economic activity in East Germany is expected to grow significantly, though somewhat less strongly than in Germany as a whole. In the years ahead, the Halle Institute for Economic Research (IWH) forecasts only minor differences in growth rates between East and West Germany. The East German economy is expected to grow by 0.9% in the current year (Germany as a whole: 1.3%). Thereafter, output in East Germany is likely to expand at a pace broadly similar to that of Germany overall, rising by 0.9% in 2027 and by 0.4% in 2028.
The Joint Economic Forecast Project Group notes in its Autumn Report that the recovery of the German economy is stronger than anticipated in the spring report, even though high energy prices and structural problems continue to weigh on economic activity. In addition, the summer revision of the national accounts by the Federal Statistical Office has raised the level of economic output. As a result, the re¬cessions of 2023 and 2024 appear less severe than previously reported. For the German states, and hence for East Germany, this revision will not be incorporated until next year.
The current recovery is being driven to a considerable extent by stronger foreign demand. “East Germany is benefiting from this as well, albeit to a lesser degree, since export-oriented industries account for a smaller share of economic activity than in West Germany,” says Oliver Holtemöller, Head of the Department Macroeconomics and Vice President at the IWH. Thus, output in Germany as a whole was 0.9% higher in the first half of 2026 than a year earlier, compared with only 0.5% in East Germany. In Saxony and Thuringia, output even declined by 0.3% and 0.8%, respectively. In Berlin, growth matched the national average at 0.9%, while Brandenburg recorded a stronger increase of 1.4% and growth in Saxony-Anhalt was, with 0.6%, somewhat weaker.
“By contrast, the temporary drag on output in the third quarter projected by the institutes as a result of low water levels on the Rhine affects only the West German economy,” says Oliver Holtemöller. Overall, the East German economy is expected to grow by 0.9% in 2026, 0.4 percentage points less than the German economy as a whole. Thereafter, output in East Germany is likely to expand at a pace broadly similar to that of Germany overall, rising by 0.9% in 2027 and by 0.4% in 2028. The unemployment rate in East Germany is projected to average 7.9% in 2026, before falling to 7.7% in 2027 and 7.3% in 2028.
Professor Dr Oliver Holtemöller
Tel +49 345 7753 800
oliver.holtemoeller@iwh-halle.de
Joint Economic Forecast: Aufschwung mit Strukturproblemen – Finanzpolitik auf Ab-wegen. Halle (Saale), September 2026.
https://www.iwh-halle.de/publikationen/detail/aufschwung-mit-strukturproblemen-f...
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