Since the mid-1990s, the situation in the East German construction industry has deteriorated dramatically. Even the additional expenditure as a result of the flood disaster in August 2002 could not prevent real gross value added from almost halving between 1997 and 2003. This article presents econometric models for forecasting the future economic development of the Saxon and East German construction industries. A decline in the real gross value added of the Saxon construction industry of 9.6% is forecast for 2004 and a decline of 7.2% for 2005. For Eastern Germany as a whole, a decline of 7.5% can be expected for 2004 and 10.1% for 2005.