German industrialists scrap growth forecast amid Middle East conflict

German industrialists have scrapped their production forecasts for this year, citing the escalating Middle East conflict and deep-rooted structural challenges that risk pushing the manufacturing sector into a fifth consecutive year of decline.

Peter Leibinger, president of the Federation of German Industries (BDI), said the group downgraded its January forecast of 1% growth to stagnation while speaking at the Hannover Messe industrial event.

Leibinger warned the industrial sector should brace for a recession rather than a recovery, pointing to a weak start to the year and ongoing disruptions to maritime shipments linked to the war.

He said costs remain too high and competitiveness has eroded amid overlapping global crises, adding that the root of the downturn lies in structural shortcomings within Germany’s industrial base.

High labor costs, a heavy tax burden, volatile energy prices, and excessive bureaucracy are undermining Germany’s global competitiveness, with the economy lagging behind others that continue to expand.

Leibinger described Berlin’s current measures as insufficient, arguing that subsidizing crises with taxpayer money is not a sustainable solution, and urged lawmakers to agree on a growth package by summer.

He said reforms should include immediate tax cuts, investment incentives, and the digitalization of public administration, including adopting a Code as Law principle to streamline legislative processes.

*Writing by Emir Yildirim in Istanbul