Improved Economy Prospects Present a Brighter Future for East Germany - A more positive outlook for East Germany's economy emerges
The Ifo Institute in Dresden has recently assessed the business climate in Eastern Germany, revealing a mixed picture but overall signs of cautious optimism for the future.
- Industry and Construction: The business climate improved significantly in these sectors. Manufacturing companies reported a much brighter business climate compared to June, with a considerably better assessment of the current situation and increased business expectations. Similarly, construction firms had significantly improved future expectations despite slightly worse current assessments than the previous month.
- Retail and Service Sectors: The retail sector experienced a notable downturn with significantly worse current business and a generally negative outlook. The service sector's current business situation also worsened slightly, although their short-term future expectations improved modestly. Wholesale saw slightly more positive evaluations both currently and prospectively.
The Ifo Business Climate Index for Eastern Germany rose slightly in July to 88.6 points from 88.4 in June, indicating a mild overall improvement in business sentiment. While companies were slightly more satisfied with current business conditions, their expectations remained largely stable, suggesting the economic recovery remains slow.
The Ifo Business Climate East Germany survey includes reports from approximately 1,700 companies in the manufacturing sector, the service sector, retail, and the construction sector. The nuanced picture reflects sector-specific challenges and opportunities shaping the economic environment in the region.
The improvement in the business climate in the construction sector was particularly noteworthy, with companies expressing more positive expectations for the future. Similarly, the industry sector also showed significant improvement, with businesses reporting a much better current business climate and increased expectations.
In contrast, the retail sector faced a significant downturn, with both current business assessments and future expectations being rather negative. The service sector also experienced a slight deterioration in the current business situation, but the outlook for the coming months is slightly more positive.
The wholesale sector, however, saw slightly more positive evaluations both currently and prospectively. Companies in the retail, service, and wholesale sectors were asked to evaluate their current business situation and provide their expectations for the next six months, contributing to the comprehensive assessment of the business climate in Eastern Germany.
In conclusion, the economic outlook for Eastern Germany is looking more optimistic for the future, but the recovery remains slow and uneven across sectors. The Ifo Institute will continue to monitor the business climate in the region and provide regular updates to help businesses and policymakers make informed decisions.
[1] Source: Ifo Institute in Dresden [2] Source: Ifo Business Climate East Germany survey [3] Source: Ifo Institute in Dresden press release, July 2025
- In the industry sector, there's been a significant improvement in the business climate, with a brighter current situation and increased expectations for the future.
- The retail sector, on the other hand, has experienced a notable downturn, with both current business assessments and future expectations being rather negative.
