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01 09 2016
Berlin is Prospering, and Has Accomplished Economic Trend Reversal

After long years of stagnation, Berlin has embarked on a stable growth trajectory. This is the conclusion drawn by the DIW German Institute for Economic Research in Berlin. For one thing, unemployment has almost been cut in half over the past ten years, from 19 percent down to barely ten percent. Inversely, the number of gainfully employed persons has increased by 290,000 due to robust job growth that actually outpaces the national average. Moreover, the city's economic strength increased by 42 percent, which is eleven percent faster than Germany's macroeconomic growth. The DIW research institute also noted the high number of start-up businesses in Berlin. The phenomenon is complemented by a high share of self-employment. Roughly 16 percent of Berlin's gainfully employed residents are self-employed – far more than the national average of ten percent. Finally, the city also has an unusually large pool of high-skilled human resources when compared to other German states.

Financial Latitude Regained

Analogously, Berlin's finances show a favourable trend, and have restored the city's room to manoeuvre in recent years. 2014 and 2015 were the first years in which a budget surplus was earmarked for the SIWA pool of segregated assets intended for funding infrastructure measures in the growing city. Not least, Berlin was finally able to start repaying its sizeable debt. Last year, the German capital lowered its public sector debt by nearly one billion euros to 58.7 billion euros, reducing it by 1.6 percent. This makes the city state one of nine German states that managed to ease their debt burden in 2015. Indeed, its robust economic situation has enabled Berlin to maintain a sustainable debt repayment regime. However, its ability to repay debt is compromised by the urgent need to step up investments in the city infrastructure, according to the DIW. Berlin's growing population, for instance, necessitates a modernisation and expansion of the public transportation network. Other necessary investments the DIW cited include the area of business development. Although the dynamic of the start-up scene creates an excellent starting point, the institute believes that the parameters should be improved. The city ought to conduct an active location marketing in order it enhance its appeal for young innovative entrepreneurs. High-quality commercial and industrial facilities should be made available while administrative processes need to take a more service-oriented approach and to be sped up. Dedicated collaborations, e.g. with the High-Tech Start-Up Fund, could help to fundraise venture capital. Marcel Fratzscher, President of the DIW, nonetheless takes a decidedly optimistic view of Berlin's future and predicts “golden decades” ahead. According to the DIW President's estimate, Berlin harbours plenty of potential. As a business location, Berlin could be made more attractive yet, but it is right on course for an economic trend reversal.