Berlin  - Europe's biggest economy, Germany will shrink by 4.9 per cent this year, one of the nation's leading economic research groups predicted Wednesday.

Dragging down German economic growth will be a 12.9 per cent slump in exports, the Berlin-based DIW economic think tank said. Exports are a key pillar of growth in Germany, which is the world's leading export nation.

The DIW report underscores how the recession has deepened in Germany in recent months and followed a series of moves by economists to revise down the nation's growth forecast. Only four months ago, the DIW predicted the German economy would contract by 1.1 per cent.

At the most, said DIW chief Klaus Zimmermann, Germany could look forward to only "a very weak and slow recovery" for 2010.

However, the DIW decided against making a 2010 growth projection as the global recession tightens its grip on the country.

In the meantime, the DIW said it expects investment in equipment and machinery in Germany to fall by 14.9 per cent this year.

The scale of the downturn engulfing the German economy means that the nation would breach the key 3-per-cent budget rule for euro member states and to report a budget deficit of about 3.3 per cent of gross domestic product this year. (dpa)