Although the industrial and service sectors have continued to grow at a brisk pace, they have not been able to completely offset the decline in building activity. As a result, economic output in eastern Germany increased at a rate of only two percent in 1996, and a similar figure is expected for 1997. In the future, however, higher rates of growth are once again anticipated, for the downturn in the construction sector will soon have bottomed out and growth will increasingly be driven by manufacturing industry and the service sector.

In 1997, these sectors are expected to expand at a rate of six percent and five percent respectively. The labor market situation in the new federal states continues to be unsatisfactory. Although unemployment declined briefly, it has once again risen to high levels. In 1997, unemployment in the eastern part of the Federal Republic is expected to average 1 7 percent, which means approximately 1.3 million people there will be registered as unemployed. The general economic upturn gives cause for optimism, however, and there are signs that unemployment will decline again in the future.