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German growth will slow sharply this year, the government said Wednesday, but vowed Europe's top economy would dodge recession despite the ongoing eurozone crisis and weaker demand from emerging markets.

Berlin slashed its forecast for output in 2012 to 0.7 percent from a previous estimate of 1.0 percent but predicted that Germany would rebound next year to expand by 1.6 percent.

Nevertheless, Economy Minister Philipp Roesler insisted: "There can be no talk of recession."

He said the economy likely shrank by 0.3 percent in the final quarter of last year but expected "moderate" growth of 0.1 percent in the first quarter of 2012, avoiding recession, defined as two consecutive quarters of negative growth.

"Germany is and remains an anchor for stability and growth in Europe," the minister said as he presented the twice-yearly government forecasts.

"After two extraordinarily strong growth years, the German economy is still in robust form. However, due to a difficult external environment, we are expecting a temporary dip in growth in the first half of the year," he said.

"Nevertheless, we are firmly convinced that the German economy will find its way back to a strong growth path in the course of the year."

The "main risk" for growth in 2012 is "without doubt a worsening of the crisis in Europe," the minister said.

He said the projections were based on the assumption of a relaxation in market tensions and a rapid solution to the eurozone debt crisis.

Joerg Kraemer, the chief economist at Commerzbank, told AFP: "Germany is being hit by the euro crisis. That's the only explanation I can give for the economy shrinking in the fourth quarter."

He added he was "more cautious" on the forecasts for 2012, seeing flat growth.

The German economy suffered badly during the 2008 global financial crisis, registering its worst recession in six decades.

But due to multi-billion-euro growth packages ploughed into the economy and a scheme allowing workers to reduce their hours while keeping their jobs, Chancellor Angela Merkel managed to keep a lid on unemployment and growth rebounded strongly.

After shrinking by around 5.0 percent in 2009, Germany marked record growth of 3.7 percent in 2010 and continued to grow at a decent clip of 3.0 percent last year.

However even Germany's resilience could not withstand a eurozone crisis that has threatened to tip the 17-nation zone as a whole into recession, economists say.

Nonetheless, unemployment remains near record lows and forward-looking data from Germany continues to surprise analysts, with Tuesday's ZEW survey of investor confidence soaring on hopes of a quick end to the eurozone turmoil.

Roesler said that despite the slowdown in growth, the German economy would continue to create jobs, with 220,000 new positions likely this year.

And, as Germany pushes fellow eurozone countries to implement painful austerity measures, the minister said that Germany's public deficit would shrink to 1.0 percent in 2012, way below EU limits.

On Tuesday, the World Bank slashed its global economic growth forecasts amid weakness in several major developing countries, particularly Brazil and India, that is likely to hit Germany, the world's second top exporter.

However, after years of criticism against Germany that it was over-reliant on exports, there are increasing signs that the economy is becoming more balanced.

"The growth dynamic in 2012 will come exclusively from domestic demand. Private consumption will support the German economy significantly," Roesler said.

"This will strengthen the resistance of the German economy from outside influences," he added.

He said weaker growth in emerging markets had already been included in the forecasts.

AFP