Facts & Figures: Hesse and Thuringia Federal States in Germany

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1 Helaba Research REGIONAL FOCUS 11 November 15 Facts & Figures: and Federal States in AUTHOR Barbara Bahadori phone: +9 9/ is a federal state consisting of 1 Bundesländer (federal states). Of these, and are two states situated in the heart of. EDITOR Dr. Stefan Mitropoulos PUBLISHER Dr. Gertrud R. Traud Chief Economist/ Head of Research Helaba Landesbank n-thüringen MAIN TOWER Neue Mainzer Str Frankfurt am Main phone: +9 9/ fax: +9 9/ and in the middle of Inhabitants (in million, December 1) North Rhine- Westphalia 17, m Rhineland- Palatinate, m Saarland 1, m,1 m Bremen,7 m Hamburg 1,8 m Lower 7,8 m Baden- Wuerttemberg 1,7 m 2,2 m West Pomerania 1, m Schleswig- Holstein 2,8 m Mecklenburg- - Anhalt 2,2 m Bavaria 12,7 m Brandenburg 2,5 m,1 m Berlin 3,5 m is home to 7.5 % of s population, and its residents generate 8. % of the country s GDP. With that, has a per capita GDP that is 15 % above the national average. With regard to productivity GDP per person in employment is top in (not counting the city states Berlin, Hamburg, Bremen) and exceeds the national average by 11 %. At an average of 5.5 %, s unemployment rate in January to October 15 was noticeably lower than the national level of.5 %., too, is a successful state. However, an assessment needs to take into account that like all new states started from a very low level of economic performance after reunification. By now, GDP per capita (in percentage of the German average) has more than doubled in and stands at 7 % of the national average. This publication was very carefully researched and prepared. However, it contains analyses and forecasts regarding current and future market conditions that are for informational purposes only. The data is based on sources that we consider reliable, though we cannot assume any responsibility for the sources being accurate, complete, and up-to-date. All statements in this publication are for informational purposes. They must not be taken as an offer or recommendation for investment decisions. Although the unemployment rate in, at an average rate of 7.5 % in January to October 15, was above the national average, it was still considerably lower than in the other East German federal states. Selected key figures Area (km 2 ) 357,3 21,115 1,173 Inhabitants (December 1, mill.) GDP (nominal, billion, 1) 2, GDP per capita (, 1) 35,9 1,3 25, GDP per employee (, 1) 8,1 75,7 51,8 Unemployment rate (%, 15, Jan.-Oct.) Sources: Regional statistical offices, Bundesagentur für Arbeit, Helaba Research HELABA RESEARCH 11 NO VEMBER 15 HEL ABA 1

2 s per capita GDP 5 % above the EU average These two federal states also hold up well in an international comparison. For example, s GDP is as large as Denmark s, and the per capita output is 5 % higher than the EU average. At 8 %, s economic output per capita is still slightly below the EU average. However, compared with other successor states of the former Eastern Bloc such as Poland ( %) and Czech Republic (5 %), this is an excellent level. s GDP equal to Denmark s, s per capita GDP higher than Central/Eastern Europe GDP (nominal, billion, 1) GDP per capita ( ) GDP GDP per capita Sources: Eurostat, National accounts of the federal states, Helaba Research Crucial to s strong economic performance is the state s special mix of sectors. No other federal state can boast simultaneously an important financial center, an international airport, and a highly-regarded international fair. This is also reflected in the statistical data: One third of gross value added is generated in the economic sector Financing, insurance, renting, business service providers. Another 22 % of the output comes from the sector Trade, transport, tourism, telecommunication. Service-provider state, industrial Share of gross value added (1) Public and other services 22% % 2 Financing, insurance, renting, business service providers 2% 33% 21% Trade, transport, tourism, telecommunication Construction Total industry (without construction sector) Agriculture, forestry % 1 22% 2% 21% 2% Sources: National accounts of the federal states, Helaba Research Sector mix in : financial center, airport, fair, chemicals/pharma The reason for the exceptional sector composition in is at first the financial centre Frankfurt. 19 domestic and foreign banks are headquartered in Frankfurt, which is % of all supra-regional financial institutions active in (i.e. not counting savings banks and credit unions). Another important factor for as a business location is Frankfurt Airport, which is used by 28 % of passengers and 8 % of the cargo volume in German air traffic. It is unchallenged in the first place in and is the largest hub in continental Europe, with regard to transportation of goods and the second largest with regard to passengers. The Frankfurt Fair is another asset that strengthens the region s international orientation. In terms of visitors and exhibitors, the Fair ranks first in, with international exhibitors also appreciating the location. HELABA RESEARCH 11 NO VEMBER 15 HEL ABA 2

3 Large share of industry in At 19 % of the gross value added, the industrial sector in plays a smaller role than in, where it accounts for 22 %. Within industrial manufacturing, there are clear focal points in : One quarter of industrial sales are generated in the sector chemical and pharmaceutical. Motor vehicles/other transport and the metals sector generated 1 %, and 12 % respectively, of s industrial sales. With that, three sectors account for 5 % of sales. The structure of industry is more diversified in. Thus, four sectors food and beverages, basic metals and metal, electric/electronic and optical, motor vehicles and trailers make up 58 % of s industrial sales in nearly equal shares. Chemicals/pharma most important sector in Diversified industrial structure in Share of industrial sales (January to August 15) Share of industrial sales (January to August 15) Motor vehicles other transport 1% Chemicals, pharmazeutical 2% Basic metals, metal Electric/ electronic/ optical Other 1 Machinery, Food, beverages Rubber/plastic Sources: Hessisches Statistisches Landesamt, Helaba Research Motor vehicles, trailers 1% Machinery, Rubber/plastic Wood/paper % Electric/ electronic/ optical 1 Basic metals, metal 1% Other Food, beverages Sources: Thüringer Landesamt für Statistik, Helaba Research Non metalic mineral Chemicals, pharmazeutical The 25 largest companies The economic structure of the federal states is clearly reflected in the twenty-five largest enterprises in and, whereby our rankings 1 were determined by a company s workforce in the respective state, and not by its importance in as a whole or worldwide. The 25 largest companies in Sources: Helaba Research, n Agentur, LEG Thüringen The 25 largest companies in Rank Company Sector Rank Company Sector 1 Deutsche Lufthansa AG Transportation 1 Edeka Wholesale and retail trade 2 Rew e Group Wholesale and retail trade 2 Deutsche Bahn AG Transportation 3 Deutsche Bahn AG Transportation 3 Deutsche Post AG Transportation Fraport Group Transportation Randstad Deutschland Temporary employment company 5 Deutsche Post Group Transportation 5 Bosch Electric/electronic Commerzbank AG Banking Helios Kliniken GmbH Hospitals 7 Deutsche Telekom AG Telecommunications 7 Rew e Markt Region Ost Wholesale and retail trade 8 Continental Group Automotive supplier 8 Rhön-Klinikum Hospitals 9 Volksw agen AG Automotive industry 9 Zeitungsgruppe Thüringen Publishing 1 Adam Opel AG Automotive industry 1 SWE Stadtw erke Erfurt GmbH Utility 11 Rhön-Klinikum AG Hospitals 11 Carl Zeiss AG Optical/electronic 12 DZ Bank Gruppe Banking 12 Deutsche Telekom AG Telekommunication 13 Deutsche Bank AG Banking 13 Opel Eisenach GmbH Automotive industry 1 Merck KGaA Chemicals, pharmazeut. 1 Continental Gruppe Automotive supplier 15 Metro Group Wholesale and retail trade 15 E.ON Thüringer Energie AG Utility 1 Sanofi Group Chemicals, pharmazeut. 1 GeAT Temporary employment company 17 WISAG Facility Service Holding Service to buildings 17 Jenoptik-Group Optical/electronic Pharmazeutical, 18 B. Braun Melsungen AG 18 Metro Group Wholesale and retail trade medical engineering Procter & Gamble ITT Industrie- und Transportschutz Thüringen GmbH 19 Chemicals 19 Security firm GmbH & Co. Operations ohg Siemens AG Electric/electronic Bertelsmann Printing, call center 21 Helaba Group Banking 21 Rege Motorenteile GmbH Automotive supplier 22 Stadtw erke Frankfurt am Main Utility, Transportation 22 Stadtw erke Jena Utility 23 Bilfinger SE Construction 23 August Storck KG Food industry 2 Fresenius SE & Co. KGaA Pharmazeutical, hospitals 2 Siemens Electric/electronic 25 Evonik Industries AG Chemicals, utility, real estate 25 K+S Kali GmbH Exploitation of salt 1 The ranking for is based upon the employment of 12, and for on 1. However, we know from experience that the enterprises and their ranking change only slightly. HELABA RESEARCH 11 NO VEMBER 15 HEL ABA 3

4 Export ratios on a high level The export rates of the industrial enterprises have risen remarkably over the last fifteen years in both of the federal states. And, where foreign sales account for 53 % of total sales, is above-average by German standards in 15 (January to March). In, too, the export shares have improved to 3 %. The economic crisis saw a sharp slump in domestic and foreign demand in 8/9, so that, in the end the export ratios declined slightly. German businesses, and thus also those in and, were able to profit particularly strongly from the global economic recovery in 1, as a result of which the export shares were surging again. After that the export ratios maintained their high levels, owing to the strengthening of the domestic demand. This year the export rations in as a whole and in are rising again whereas in, they are slightly under the last year s level. Export quotas on a high level Most exports go to Europe Share of foreign sales among total sales in % Share of exports (January to June 15) * *Average January to August France Netherlands Italy Austria Spain Belgium Other Eurozone UK Other EU USA China Other Asia % 1% 13% France Italy Austria Spain Other Eurozone UK Hungary Czech Republic Poland Other EU USA China Other Asien Other countries 1 Other Countries Russia 1, Russia 1, Sources: Regional statistical offices, Helaba Research % 13% % 1 Main export target: Europe The Euro Zone is the main target for exports in 15: 3 % of Hessian and n exports were sent there, with the neighbouring states and Italy among the top customers. Europe as a whole received 5 % and 71 %, respectively, of the exports of and. Asia was the second-largest target region (share of exports: 1 % and 15 %, respectively), with China as the chief importer. The US played an important role for the companies in, as it was the country with the highest single share of exports. For, by contrast, were the neighbours to the East Hungary, the Czech Republic and Poland important customer countries for its. 15: economic growth on the same level Real change in GDP compared to previous year in % st half-year Stable labour markets Unemployment rate in % of labour force Eastern Western G * *Average January to October 15 Sources: Bundesagentur für Arbeit, Helaba Research After the economic downturn in 9, the German federal states of and achieved strong growth rates in the next two years that followed. After that the economy cooled down and and were more strongly affected. But in contrast to the development in as a whole, the braking effect wore off more quickly in and led to a recovery in 13; in there was no improvement. The recovery in 1 made positive growth rates in every German federal state. with 1. % reached the German average and was slightly HELABA RESEARCH 11 NO VEMBER 15 HEL ABA

5 F ACT S & FI GURES: HES SE AND THURING I A F EDERAL ST AT ES I N G E RMANY GDP-growth 1: 1. % Rising employment below with 1. %. The economic recovery continues in 15, as the German growth rate of 1. % in the first half-year shows. The development in is mainly driven by domestic consumption, which is growing dynamically in particular due to higher real wage increases and the strong immigration. The expansive monetary policy and the historically low interest rates should also support the economy a little bit. The situation in many countries of the euro area is getting better, whereas the global growth is quite weak. Therefore the investment in is increasing only slightly. So growth prospects remain for at the projected national average of 1.7 %. For less growth is expected, due to the weak first half of 15; in the coming year, the gap should narrow again. On the Hessian and n labour markets, the high level of output of recent years is still having an impact. The unemployment rate in stayed for four years on the same level. In, it is falling futhermore and getting closer to the national average. Besides capacity utilization demographic factors play an important role in the improvement of the labour market - especially in the eastern federal states of. The stability in the labor market is also reflected in the positive employment trend which lasts for almost five years now. Not only domestic workers found a new job, but companies could hire immigrant job seekers according to their requirements. Debt: about average, slightly above average Debt of federal states per capita in, December 1 Total Bavaria Baden- Wuertt. Mecklenb.- W. Pom. Lower Brandenburg North Rhinel.- Rhine- Palatinate Westphalia - Anhalt Schlesw.- Holstein Saarland Sources: Bundesfinanzministerium, Helaba Research The economically strong federal states have noticeably higher tax revenues. For example, in the financial strength per capita is 22 % above the national average with regard to the income and corporate tax. By contrast, reaches only 53 % of the average. Since is, on the one hand, a federal state and, on the other hand, pays attention to the uniformity of living standards, the VAT is distributed according to other criteria, as a result of which the financially weak federal states catch up. The financial equalization between the federal states leads to a further equalization of revenue per capita, which is then boosted even more by the general federal supplementary grants. Thus, the financial strength per capita in is only 2 % above average after the redistribution, while reaches 9 % of the average. well positioned because of financial strength The financial equalization system between the states and the guarantee of the federal states existence in the constitution have prompted the ratings agency Fitch to tie the ratings of the federal states to that of. and, therefore, could get a Triple A-rating, if, as an issuer, they themselves were rated by Fitch. Standard & Poor s takes into account the economic productivity and the debt situation of the various federal states and differentiates accordingly: receives an AA rating, because it has high tax revenues thanks to its economic strength, whereas its per capita debt is not below the average as in Bavaria and ( is only rated by Fitch). HELABA RESEARCH 11 NO VEMBER 15 HEL ABA 5