This compares to a solid growth performance for Europe's powerhouse economy in 2000 which many private economists believe hit about three per cent with the DIW forecasting that growth will accelerate again in 2002 to 2.7 per cent.
In predicting a weaker growth rate this year, DIW joins other leading German economic think tanks which have already forecast that signs of an economic cooling down in the U.S. were likely to result in slower growth in Europe's biggest economy.
Both the Munich-based Ifo-economic research institute and the Kiel-based institute for the world economy have reduced their forecasts for this year from 2.5 per cent to 2.4 per cent.
Despite the lower growth expectations, DIW predicted unemployment would fall from 9.2 per cent last year to 8.5 per cent this year.
But while the institutes have become more downbeat in their forecasts for growth in Germany this year, the government remains optimistic that the nation's economy will continue to expand strongly during the coming 12 months.
Chancellor Gerhard Schroeder's new economic advisor, Bernd Pfaffenbach told a German newspaper this week that growth would again hit three per cent in 2001.
In an interview published in Tuesday's Berliner Zeitung, Pfaffenbach said his assessment was based on a series of factors including the low price of oil and the introduction of tax cuts as part of Germany's taxation reform package, which comes into effect this year.
But as a measure of how the economic climate in Germany is changing, in October the nation's six leading economic institutes revised down their earlier growth outlook for the nation this year from 2.8 per cent to 2.7 per cent.
This compares to a growth rate in Germany in 1999 of just 1.4 per cent as the nation's struggled to set itself free from the contraction of global trade in the wake of the emerging markets crisis.
(dpa)
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