The Bundesbank slashed Friday its growth forecasts for Germany both this year and next year, but insisted the underlying health of Europe's top economy meant the downturn will be only temporary.
In its December monthly report, the German central bank predicted the economy would grow by 0.7 percent in 2012 and then by only 0.4 percent in 2013, before expanding again by 1.9 percent in 2014.
In its previous forecasts published in June, the Bundesbank had been pencilling in gross domestic product (GDP) growth of 1.0 percent for 2012 and 1.6 percent for 2013.
"The cyclical outlook for the German economy has dimmed," the central bank wrote.
"There are even indications that economy activity may actually fall in the final quarter of 2012 and the first quarter of 2013," it said, blaming the anticipated contraction on recessions in some of its eurozone neighbours and the slowing global economy.
"However, there are sound reasons to believe that Germany will soon return to a growth path," the report said.
"The sound underlying health of the German economy suggests that it will overcome the temporary lull without major damage to the labour market, in particular," it said.