Bucking the trend in the east - economic output in Saxony falls

According to an economic forecast by the Ifo Institute, economic output in Saxony will decline this year, bucking the trend in eastern Germany. While an increase in gross domestic product of 0.3 percent is forecast for the east as a whole compared to 2023, a decline of 0.5 percent is expected in Saxony. This is indicated by the widely varying development in the first half of 2024. This means that Saxony will also lag behind the national figure (minus 0.1 percent).

According to the Ifo Institute in Dresden, the reason for this is the greater dependence on industry, which has a strong impact on the overall result. The concentration on the automotive industry in particular is having a negative impact. There was a decline of 2.4 percent in the manufacturing sector (East: minus 2.0 percent).

Automotive industry in crisis

According to the Ministry of Economic Affairs, the automotive industry is Saxony's strongest sector in terms of turnover. It accounts for more than a quarter of industrial turnover and over a third of foreign turnover. The car manufacturers Volkswagen, BMW and Porsche as well as around 780 suppliers, equipment suppliers and service providers employ a total of around 95,000 people.

The car manufacturer VW in particular is in crisis due to falling demand for e-cars, with plant closures and compulsory redundancies on the cards. More than 10,000 people work for VW in Saxony.

Service providers are key to growth in the East

The construction industry (minus 4.9 percent) is also performing worse than the East German average (minus 4.3 percent). At the same time, the increase in service providers in the Free State is weaker (Saxony: 0.6 percent, East: 1.3 percent). According to Joachim Ragnitz, Deputy Director of the Dresden Ifo Institute, this sector in particular is decisive for the overall development in the East.

"The service sectors in eastern Germany in particular are expanding strongly, and the weakening industry has less weight here overall," he said. His colleague from Munich, Robert Lehmann, added: "The structural change in the manufacturing industry is also affecting the eastern German economy, but with less intensity due to its specialization."

Trend reversal in Saxony in 2025

There is hope for improvement in the coming year. The Ifo Institute expects a trend reversal for Saxony. Moderate growth in gross domestic product of 0.4 percent is predicted. All three sectors (manufacturing, construction and service providers) are expected to perform significantly better.

The forecast also predicts positive development for the whole of eastern Germany. Gross domestic product is expected to increase by 0.7 percent. Growth will once again be driven by the consumer-related service sectors, while industry will continue to shrink.