Berlin - Despite the current panic on financial markets, a recession is not in prospect in Germany, leading economic research institute, DIW, said Wednesday in Berlin.

DIW said the effects of the financial crisis were "manageable" and predicted the crisis would not spread to the rest of the economy. It forecast German gross domestic product (GDP) to grow next year by 1.0 per cent.

The Berlin institute said Germany's last upswing was coming to an end, with 2008 growth likely to settle at 1.9 per cent, well below its July forecast for the current year of 2.7 per cent.

DIW said the slowing in Germany's growth in recent months was "not essentially linked to the international financial crisis," but rather to declining demand for German goods in nations hit by real estate downturns.

It said a sharp slump in exports had been prevented by stable growth levels in other markets.

But the economists said they were concerned about the risk of soaring German public deficits.

With the German federation and states posting huge guarantees for both commercial banks and their own state banks, it was possible governments would be caught out with huge bills to settle. (dpa)