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Implications of the Joint Economic Forecast Spring 2026 and of new data for the East German economy
In 2025, the East German economy expanded by 0.4%, somewhat more than Germany as a whole (0.2%). For 2026, the Halle Institute for Economic Research (IWH) expects growth of 0.7% for East Germany (Germany: 0.6%). The unemployment rate is likely to amount to 7.9% in the current year, after 7.8% in 2025.
In its Spring Report, the Joint Economic Forecast Project Group notes that, after a long period of economic weakness, a recovery set in over the course of the past year in Germany. The energy price shock triggered by the war in Iran is likely to dampen this recovery, but ‒ given the expansionary fiscal policy stance ‒ will not bring it to a complete halt. The same applies to the East German economy. In 2025, it expanded by 0.4%, somewhat more strongly than Germany as a whole (see figure). As in previous years, the marked increase in Berlin’s economy (1.1%) made the difference, and as in earlier years, value added in the economic sector comprising wholesale and retail trade, transport, accommodation and food service activities, as well as information and communication, grew more strongly in East Germany than in the West.
In 2025, value added in East Germany’s manufacturing sector declined slightly less than in Germany as a whole (‒0.8% compared with ‒1.0%). However, current data on sales and orders indicate that the situation of industry in the East is currently no more favorable than in the West. For this reason, in the current year the economy is likely to expand only a bit more strongly, by 0.7%, than in Germany overall (0.6%). For 2027, growth of 0.9% is forecast for both economic regions. The East German unemployment rate is expected to increase slightly to 7.9% in this year, before falling back to 7.8% in 2027.
“The energy price shock is likely to weigh on the East German economy about as much as on the German economy as a whole,” says Oliver Holtemöller, Head of the Department Macroeconomics and Vice President at the IWH. Although energy prices are somewhat more important for the East German manufacturing sector than for that in the West ‒ because the share of energy intensive industries in total manufacturing is slightly higher ‒ services, which are less affected by the energy price shock, account for a larger share of total value added in the East (75%) than in Germany overall (71%).
Rafael Barth
Tel +49 345 7753 832
presse@iwh-halle.de
Joint Economic Forecast, Spring 2026 Report (in German):
Joint Economic Forecast: Energiepreisschock überlagert Fiskalimpuls – Wachstumskräfte versiegen. München, April 2026.
https://gemeinschaftsdiagnose.de/category/gutachten/
Real gross domestic product in East Germany
Source: IWH
Copyright: IWH
Economic growth in East Germany slightly higher than in the West
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Real gross domestic product in East Germany
Source: IWH
Copyright: IWH
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