Eastern Germany's Bleak Economic Outlook
The vibe in the business world of eastern Germany is becoming progressively dour, with the ifo Institute in Dresden reporting a noticeable dip in the business climate index for Eastern Germany, from 90.1 to 88.2 points, between July and August. Companies expressed less optimism about their current status and future prospects in comparison to the previous month.
However, the industrial sector experienced a boost in August. Industrial companies rated their current economic situation more favorably than in July, yet their expectations for future growth declined slightly.
On the flip side, the service sector is experiencing a sharp decline. Surveyed service companies' assessments of their ongoing business activities worsened, and their outlook for the upcoming months grew increasingly grim.
The index for the trade sector held steady from the previous month, while wholesale trade showed a slight improvement, and retail trade saw a modest decline. Both sectors exhibited a modest improvement in business expectations.
The construction industry retains its pessimism. Construction companies rated their current business situation worse than in July and displayed more discouragement for the future. The ifo business climate for Eastern Germany is primarily based on approximately 1,700 reports from companies that are regularly questioned about their current business situation and their projections for the next six months.
Though economics in Eastern Germany appear bleak, businesses in The Netherlands might be experiencing a different story. Relevant institutions report that the business climate in The Netherlands may reveal signs of improvement or stability. However, the content focuses on Eastern Germany, with no specific data on The Netherlands provided initially.
Supplementary Reads:
Economic Undulations - A Global Perspective
The Netherlands
The Netherlands boasts a thriving GDP growth of 1.6% in 2025 and 1.8% in 2026, fueled by robust wage growth, declining inflation, and tax cuts that raise households' real disposable incomes. Private consumption is expected to keep rising, supported by these factors, while business investment and trade improve due to favorable financial conditions and a better external environment.
Known as the third-largest exporter of goods and services, the Netherlands maintains a highly open trade economy, with the services sector, accounting for over 69.6% of national revenue and employing 84% of the workforce, focusing on transportation, distribution, logistics, banking, insurance, water engineering, and new technologies. The Buy Now Pay Later (BNPL) market in the Netherlands is also on an upward trajectory, expected to reach $10.29 billion in 2025, driven by a robust e-commerce ecosystem, fintech innovations, and shifting consumer payment preferences. However, the regulatory environment is becoming more stringent to prevent potential over-indebtedness risks.
Eastern Germany
Eastern Germany has grappled with economic contraction, with the German economy as a whole contracting by 0.2% in 2024, following a 0.3% decline in 2023. This slump is largely due to high prices dampening consumer spending and widespread layoffs across major corporations.
Despite efforts to branch out into other markets, Germany's economy continues to rely heavily on China for various goods and raw materials. The trade surplus with the United States reached a record €65 billion during the first 11 months of 2024, making Germany a likely target for potential tariffs from the U.S. administration.
Business sentiment in Germany remains mixed. The Ifo Business Climate Index stood at 85.2 in February 2025, unchanged from the previous month but falling short of market consensus. While companies became more optimistic about their outlook, their appraisal of the current business situation declined, particularly in the transport and logistics sector.
