Rapid Regional Rebound
Germany is poised for a vigorous economic comeback from coronavirus restrictions, but the business landscape has changed. One of the unexpected winners has been the northeastern port city of Rostock in the regional state of Mecklenburg-Vorpommern.
The consensus among economic experts is that Germany will return to robust economic growth in 2021 and 2022 – but which parts of the country have the sunniest outlook?
Switzerland-based think tank Prognos surveyed growth projections for Germany’s 401 districts and independent municipalities and coming out on top was the northeastern port city of Rostock. Prognos projects a cumulative gross value-added growth of 16.4 percent between 2019 and 2030 for the city. One reason is the availability of quality labor in the area. Prognos predicts that the German workforce will shrink by 7 percent from 2019 to 2030, with Rostock being one of 15 regions to record a growing workforce during that period.
“In the post-pandemic decade, the main drag on economic performance across Germany’s regions will be the competition for skilled workers, and those cities and districts that serve as magnets for top people will be the winners,” says Dr. Michael Böhmer, Prognos’ chief economist. “Rostock is among the top regions in our ranking because it is a medium-sized city home to universities that attract young people from all over the region. It also has a sparsely populated periphery, so companies can still find the commercial property that their business models need to flourish,” he adds.
Rounding out the Prognos top 10 are Potsdam, Leipzig, Regensburg and Darmstadt, as well as three districts on the periphery of Munich (Dachau, Ebersberg and Erding) and two on the outskirts of Berlin (Dahme-Spreewald and Oder-Spree). “The districts just outside Berlin will benefit from the Berlin Brandenburg Airport and the Tesla factory in Grünheide since these new projects will create tens of thousands of jobs,” Böhmer says.
Another factor generating business opportunities in some specific locations in Germany are government support programs. They include monetary incentive programs for the regions affected by Germany’s phase-out of coal-powered electricity, the GRW regional economic promotion program, which assists with the costs for setting up business production facilities in underdeveloped areas, and the EUR 10 billion Future Fund package for education and next-generation technology.
“The coal phase-out law, for example, makes rezoning easier in the coal-producing regions, which renders them more attractive for greenfield investments, which, in turn, often trigger associated projects,” says Jens Nagel, director at Germany Trade & Invest (GTAI).
The Bottom Line
Robust economic growth is set to resume after the coronavirus pandemic, but some parts of Germany are likely to rebound more strongly than others. The northeastern city of Rostock surprisingly came out on top in a regional ranking by Swiss think tank Prognos.
“An additional draw is that Germany has traditionally been very decentralized, so professionals within the international community don’t have to travel hours to have access to good schools, good hospitals, and culture and entertainment,” Nagel adds.
Prognos’ analysis suggests a considerable amount of regional variation. What’s true in one part of the country isn’t necessarily so in another. “Taxi companies, for example, have been hit hard by the pandemic in the larger cities, where people use taxis for recreation and culture, but much less so in rural regions, where people mainly use taxis to do things like see the doctor,” Böhmer says. “We always advise businesses to conduct thorough feasibility studies for their respective sector, as location factors play out differently for different industries.”