Germany’s economy has grown only minimally in the past two years. There are big regional differences. Gross domestic product fell in more than half of all federal states. For some, this comes as a surprise.
A recession is expected in Germany for the winter. This is defined as two consecutive quarters of falling gross domestic product. The last recession of this kind was in 2020 during the corona pandemic and Germany has not recovered from it to this day. Compared to the level of New Year’s Eve 2019, the economy has grown by a meager 0.2 percent.
However, this is only the average value for the whole of Germany and, as is usual with average values, there are clear regional differences. GDP grew in only seven federal states and fell in nine others. The range extends from 6.9 percent plus in Rhineland-Palatinate to minus 6.7 percent in Hamburg.
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During the corona and energy crisis, GDP also grew in Schleswig-Holstein (2.6 percent), Berlin and Baden-Württemberg (1.8 percent each), Lower Saxony and Bremen (1.7 percent each) and in Hesse (1. 5 percent). There was a minimal decrease of 0.04 percent in Bavaria, which was recorded in Thuringia (-1.6 percent), Brandenburg (-2.5 percent), North Rhine-Westphalia (-2.6 percent), Saarland (-2, 7 percent), Saxony (-3.5 percent), Mecklenburg-Western Pomerania (-3.6 percent) and Saxony-Anhalt (-5.7 percent) were stronger.
As is often the case with such statistics, there is a West-East divide. The old federal states, excluding Berlin, have grown by an average of 0.4 percent since the beginning of the Corona crisis, while the economy in the eastern German federal states fell by an average of 2.5 percent. This is contrary to the long-term trend: since 1993, GDP in the new federal states has grown much faster on average than in the old ones.
The economic development also shows a connection with the number of corona infections and corona deaths in each federal state, but only weakly. Schleswig-Holstein and Berlin are not only two federal states in the top 3 with the greatest economic growth, but also in the top 3 with the lowest numbers of corona cases and deaths per 100,000 inhabitants. Leader Rhineland-Palatinate is above average in both statistics, but only has the fifth fewest deaths.
At the other end of the scale, however, the comparison with the corona numbers fails. The economic taillights of Mecklenburg-Western Pomerania, Saxony-Anhalt and Hamburg each had a below-average number of corona patients and deaths. Only the deaths per 100,000 inhabitants in Saxony-Anhalt are particularly striking.
“Structural features of the individual federal states are decisive for the differences,” explains Robert Lehmann. He is an economic researcher at the Munich ifo Institute and has examined the development of the individual regions for a study. This shows that people in Schleswig-Holstein, for example, were particularly frugal during the Corona crisis and therefore now consume more than citizens of other federal states – which leads to a strengthening of the regional economy. In Bremen, Lower Saxony and Baden-Württemberg it is above all the reinvigorated auto industry that is responsible for growth, in Berlin the large service sector, which is benefiting disproportionately from the end of the corona restrictions.
Conversely, federal states that are designed for energy-intensive industries are suffering. This affects, for example, the metal location of North Rhine-Westphalia and the industries dependent on Russian gas, for example in Mecklenburg-Western Pomerania and Brandenburg. Saxony-Anhalt, on the other hand, ends up at the end of the scale because, according to the ifo Institute, the inflation rates here have always been well above average this year. The chemical industry, which is strongly represented, is also suffering here.
The values for the leader Rhineland-Palatinate could soon fall again. The federal state has both automotive suppliers and important pharmaceutical locations, which have been important for the economy in the past two years. However, the region is also dependent on metal manufacturers and the chemical industry – above all BASF in Ludwigshafen – which are particularly affected by the current energy prices. According to the rating agency Scope, Rhineland-Palatinate will be more heavily burdened than other federal states.
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For Germany-wide economic development, however, this only plays a subordinate role. The study by the ifo Institute comes to the conclusion that the three economically strongest federal states of Bavaria, Baden-Württemberg and North Rhine-Westphalia determine the course of the German gross domestic product. The correlation between state and federal growth is almost 100 percent. Mecklenburg-Western Pomerania, Hamburg and Berlin are the least important.
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