Economic Growth Disparities: Northern Regions Outperform Others

Recent analyses reveal a significant economic divide among Germany's federal states, with northern regions currently showing superior growth compared to their southern, eastern, and western counterparts. The latest data from the Munich-based Ifo Institute indicates that in the fourth quarter, Niedersachsen's gross domestic product (GDP) expanded by 1.4%, while Mecklenburg-Vorpommern and Schleswig-Holstein recorded increases of 1.1% and 1.0%, respectively. In stark contrast, the overall German economy experienced a contraction of 0.2% during the same period.

Hessen also demonstrated resilience, managing a growth rate of 0.8%, while Hamburg remained stable with no change in GDP. However, most other federal states reported declines according to Ifo's seasonally adjusted calculations. Notably, the northern regions are witnessing an economic upswing that appears to be independent of the national trend, largely driven by advancements in the defense industry.

Robert Lehmann, an economist at Ifo, noted the pivotal role of the defense sector in this northern growth. Conversely, states like Sachsen and Sachsen-Anhalt faced substantial downturns, with GDP plummeting by 1.8% and 1.4% respectively in the fourth quarter. Bremen, the only northern state to experience a decline, saw its GDP decrease by 0.7%, while Brandenburg and Thüringen recorded losses of 0.6% and 0.5%.

The economic struggles in southern states continue to be evident. Bavaria, Berlin, and Saarland each reported a 0.3% decrease in GDP compared to the previous quarter, marking a continuation of the economic downturn observed in Bavaria over the past two quarters, with an annual decline of 1.0%. Baden-Württemberg's GDP fell by 0.4% in the last quarter, and Nordrhein-Westfalen experienced a 0.6% contraction.

Lehmann attributes these declines to the higher concentration of energy-intensive industries in these regions, which are particularly vulnerable to fluctuations in energy prices. Rheinland-Pfalz also faced a GDP decrease of 0.4%, reflecting similar challenges.

The current economic landscape underscores a shift in growth dynamics across Germany, with northern states emerging as new leaders in economic performance, largely benefiting from specific industrial developments.