Germany's Federation of German Industries (BDI) has revised its economic outlook for 2026, now predicting stagnation rather than growth. Initial forecasts had suggested around 1% growth, but due to a sluggish start to the year and ongoing geopolitical tensions, particularly related to the Iran conflict, the industry body now expects industrial production to remain flat. This marks a significant shift, emphasizing that the country’s manufacturing sector continues a decline first observed in 2022. The BDI highlighted issues such as low capacity utilization, high costs, taxes, and bureaucracy, which undermine Germany's competitiveness.

The organization warned that the Iran war could lead to renewed declines owing to shipping disruptions and ongoing geopolitical uncertainty. While these international issues contribute to volatility, the BDI pointed out that deeper structural problems are the primary causes of Germany’s industrial stagnation. It is calling on the government to implement a broad reform package by mid-2026 to restore growth and competitiveness, recognizing that the country’s industrial base faces both external and internal challenges.