Munich remains Germany’s economic powerhouse

Munich has been crowned Germany's most economically successful city for the sixth year in a row, according to a new survey published in weekly business magazine WirtschaftsWoche on Friday.

Munich remains Germany’s economic powerhouse
The secret of Munich's allure? Photo: DPA

The study, conducted in tandem with the Initiative for New Social Market Economy (INSM) reviewed conditions in the country’s 50 largest cities over the last five years, ranking them in terms of overall economic strength and dynamism.

Munich’s wealth, job market and economic structure earned a first place ranking for overall success, followed by Münster, Hamburg and Düsseldorf.

“The Bavarian metropolis leads by income and buying power, it has the fewest people on unemployment benefits, the second lowest unemployment rate, as well as the second highest level of highly qualified individuals,” said INSM director Dieter Rath.

The northern port of Hamburg was ranked Germany’s most economically dynamic city ahead of the much smaller cites Saarbrücken and Münster.

Hamburg has “experienced a self-propelling upswing, partly driven by expanding the harbour and a healthy mix of industries,” said Henning Krumrey, the deputy editor-in-chief of WirtschaftsWoche.

But even Berlin, long considered an economic basket case in Germany, was able to improve its standing in this year, jumping to 17th on the dynamic ranking due to its thriving service sector.

“The capital has come out of the cellar, and this trend could prove to be sustainable,” said Krumrey.

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German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.