Germany's economic slump should be short-lived, the Bundesbank said on Monday, adding that the eurozone's largest economy could have already bottomed out.
Data last week showed that Europe's economic powerhouse contracted in the fourth quarter, and might be less of a pillar of support than believed for the rest of the currency bloc, where many of its peers are deeply in recession.
The German government cut its growth forecast to 0.4 percent from 1.0 percent for this year.
The Bundesbank's December forecast also suggested that GDP would rise by 0.4 percent this year, but added that there would not be a protracted slowdown.
In the January monthly report, the Bundesbank, Germany's central bank, used similar language, saying that prospects for the start of the new year had already improved with business sentiment brightening noticeably, especially for export opportunities.
"The broadly stable labour market and increasing employment prospects indicate that the business cycle weakness will not last all too long," the German central bank said, adding that already the first quarter of 2013 showed signs of improvement.
Expected rises in the ZEW investor sentiment index and the Ifo business climate index for January, due on Tuesday and Friday, respectively, are seen bolstering such hopes albeit that they will be judged against relatively low levels
Last week, the German statistics office said that the euro zone's largest economy contracted 0.5 percent in the fourth quarter of 2012.
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