Berlin - Germany's leading economic research institutes warned Tuesday that Europe's biggest economy was on the edge of a recession as the world financial crisis hits global growth.

In their twice-yearly report released in Berlin, the institutes slashed their German growth forecast for next year to just 0.2 per cent compared to a previous projection of 1.4 per cent.

The institutes expect Germany to post a 1.8 per cent expansion rate this year with growth tapering off in the final months in the wake of the wave of panic selling that hit stock markets last week.

"The German economy is on the edge of a recession," said Udo Ludwig from the IWH economic institute with Germany, the world's leading export nation, facing a sharp fall in foreign demand as the world economy slows.

The weaker growth outlook could result in job losses next year of 400,000 in Germany next yearm, the institutes also warned. (dpa)