Germany’s economy has proven more recession-proof than most of the rest of Europe, with economic growth rising past the 2 percent mark in recent weeks. Much of that resilience can be traced to the state of Berlin’s economic development — particularly to growth in such non-manufacturing sectors as corporate services and hospitality. In fact, the federal state of Berlin was the least affected by the financial crisis of all the states according to a recent study from the German Institute for Economic Research (DIW Berlin). Between 2005 and 2009, Berlin’s economic growth doubled that of Germany’s as a whole.
Besides its service sector and being the seat of the federal government, why is the Berlin area so robust economically? Karl Brenke, Scientific Advisor to DIW Berlin’s Executive Board, cites several reasons:
- Other cities have strong service sectors, but Berlin’s is particularly robust. Healthcare, education and training contribute to the area’s strength in non-industrial sectors — in fact, its comparatively small industrial base helped shield the area from a deeper recession;
- Tourism in Berlin is outpacing other cities in Germany;
- Employment numbers are showing robust growth, with more than 140,000 new jobs created in the past five years;
- Growth is forecast to continue for the foreseeable future; and
- City officials understand the importance of formulating education policies that will ensure a steady supply of well-trained workers from among the local population — not just from people moving into Berlin.
“The German capital is experiencing a revival,” noted Berlin Economics Senator Harald Wolf at the release of a mid-year economic report from the Senate Department for Economics, Technology and Women’s Affairs. “In the second quarter of 2010, industrial orders were up 13 percent on the same period a year earlier. This year’s gross domestic product will be higher in real terms than it was before the financial crisis. That means the Berlin economy will be able to more than make up for last year’s 0.7-percent contraction. I predict that we will see growth of about 1.5 percent in 2010 … We took the right decision to capitalize on Berlin’s economic strengths and potentials through targeted support for forward-looking sectors. Berlin’s industry is a successful testament to technological innovation.”
The Senator is referring to areas of expertise that Berlin chose to cultivate several years ago — a decision that was prescient to say the least, given the growth the region now enjoys. The sectors are medical engineering, IT and communications technology, media, transport systems technology, optical technology and energy-related technology. According to a September 2010 study from the Investitionbank Berlin (IBB), the subsidy arm of the Federal Land of Berlin, these areas enjoy the highest priority in terms of both corporate acquisition and support for existing companies. IBB’s financial assistance in these areas has resulted in their comprising 43 percent of the total business promotion portfolio. Of the €106 million granted by the IBB, €54 million alone went to the ICT sector, including the media. Next up in terms of financial aid were energy-related technologies (€16m), optical technologies (€13m), medical engineering (€10m), biotechnology (€7m) and transport systems technology (€6m), respectively.
Adds Berlin Partner Managing Director René Gurka: “Berlin grew at an above-average rate in good years, and coped better than other locations in bad ones. Nevertheless, we still have a lot of catching up to do with regard to other cities and regions. Our objective for the next five years is to lead Berlin into the Champions’ League of international business locations together with our supporters in the worlds of business and politics.”
This Investment Profile was prepared under the auspices of Berlin Partner GmbH. For more information on locating in the Berlin area, visit www.berlin-partner.de or call 49 30 39980 0.