Berlin is “poor, but sexy,” says Mayor Klaus Wowereit. But there is more to it: Germany’s capital also is growing faster economically than all other regions. However, problems persist.

According to a new study by the German Institute of Economic Research (DIW) covering the 2004-2009 period, the city’s gross domestic product grew by an average of 1.7 percent annually. This compares to only 0.5 percent growth for all of Germany.

Berlin has managed to reverse the trend, and is now catching up,” says DIW expert Karl Brenke. He noted, however that Berlin’s growth rate still lags behind that of other large metropoitan centers such as Hamburg, which has been growing twice as fast.

The service industry has been the driving force behind Berlin’s expansion, in particular the tourism and hospitality sectors. Other contributors are government-supported sectors such as health care and education, the study says.

Some 140,000 jobs have been created since 2005, and a growing number of Berliners are in business for themselves. One out of seven Berliners is self-employed, compared with one of nine nationwide, the study finds.

The downside is the high unemployment rate of 14 percent, the highest in Germany. The DIW attributes this in large part the fact that most of the new jobs were filled by qualified workers coming to Berlin from elsewhere. The unemployed in Berlin are mostly unskilled people.

“The gap between skilled and unskilled workers in Berlin is widening,” says DIW’s Brenke. “