The DIW think-tank said Wednesday that the German economy would likely slide briefly into recession before recovering by midyear.
DIW previously had forecast 1 per cent growth for Germany in 2012 but says that ongoing problems in other European Union will likely hurt German exports.
It says it expects the economy to recover with 2.2 per cent growth in 2013 but only if the eurozone debt crisis stabilizes.
Other German economic think tanks are forecasting 2012 growth between 0.4 per cent and 0.8 per cent. The government's independent economic advisers are predicting 0.9 per cent growth.