Here's how Berlin's economy did during the first year of corona

The city's mix of industries and strong past growth helped it get through the first year of the crisis with just a few bumps and scratches. 

Weathering a storm.
Weathering a storm.imago

Berlin-The economic and innovation report published Tuesday shows Germany's capital was dented by corona, but not as bad as the rest of the country. 

The city-state's economy minister, Ramona Pop, said that while Berlin's GDP tumbled 3.3 per cent last year, that beat the national 4.6 per cent decline. Both the federal and local governments pumped a total €4.25b into Berlin last year but the cash secured  450,000 jobs.

The capital was able to weather the crisis better than other areas because of its mix of economic support - no one industry dominates. The diversification helps insulate Berlin from external shocks.

Still, services account for about 86 per cent of the value created here and that includes tourism, hospitality and the event industry, which were all hammered by the lockdowns. But according to the report, the sector saw only a 4 per cent contraction in value creation last year against a 4 per cent gain in previous years.

Short-time work was key

Tourism in particular came to an almost complete standstill with just 12.3m overnight stays recorded last year, 64 per cent less than the more than 24m in 2019. Just how many companies were pushed over the brink by the crisis is as-yet unknown thanks to a temporary moratorium on insolvencies.

The labour market, however, has come under pressure. In the first lockdown, the number of unemployed rose significantly, but has stabilised since - albeit at a high level. On average, 192,600 Berliners were unemployed in 2020, 26.3 per cent more than in the previous year. The unemployment rate was 9.7 per cent (2019: 7.8 per cent).

Thanks to the short-time furlough programme, which allowed workers to keep their jobs despite working significantly fewer hours, employment remained relatively stable. Just under 2m were uemployed last year, just 8,000 workers (0.4 percent) less than in 2019. The figures helped Berlin weather the crisis with just a black eye.

Politicians see the economy growing strongly again this year by around three per cent, thanks in part to pre-corona growth.

Welcome to the powerhouse

"Berlin has developed very positively. We've been watching a catching-up process for just under a decade. Value creation in the city is now above the national average," said Henry Goecke, an economist at the business-friedndly Institute of the German Economy (IW).

Goecke and colleagues at the IW published a report in June assigning powerhouse status to the Hauptstadt. Last year, GDP per capital cresed €42,000, 5 per cent higher than the German average.

The figure means Berlin is finally on par with fellow powerhouses like Bavaria, Baden-Württemberg and Hesse. But he doesn't think the capital will become the country's powerhouse of powerhouses because of the country's decentralised economy.

"There are too many economically strong regions for that because of the federal structure and the history of the country," he said.

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