FRANKFURT - GROWTH of the German economy slowed sharply last year as exports were hit by the global slowdown and consumption failed to gain ground, the national statistics office said on Wednesday.

The biggest European economy grew by 1.3 per cent last year, provisional figures released by the Destatis statistics office showed.

In 2007, the biggest European economy had grown by 2.5 per cent, and economists polled by Dow Jones Newswires had expected an increase of 1.4 per cent last year.

The government's official 2008 forecast was for growth of 1.7 per cent.

Germany, also the world's leading exporter, has been hit hard by the global economic slowdown and the euro's rise in value against the dollar, which have curbed demand for its automobiles, household appliances and machine tools.

When the 2008 data was adjusted for the number of working days each year, the annual growth figure fell to 1.0 per cent.

Exports increased by 3.9 per cent in 2008, nearly half the level a year earlier, while imports rose by 5.2 per cent, and private consumption was unchanged, Destatis said.

Berlin still officially expects the economy to grow by 0.2 per cent this year but Finance Minister Peer Steinbrueck has already warned it could shrink by up to 1.0 per cent.

A finance ministry source has said the economy could contract by up to 3.0 per cent in 2009, which would mark the biggest decline since World War II.

Germany also posted a public deficit equivalent to 0.1 per cent of gross domestic product (GDP) last year, improving slightly on the the 2007 figure of 0.2 per cent of GDP.

But Mr Steinbrueck was quoted by the Financial Times Deutschland on Wednesday as saying that the German public deficit would soar to more than four percent of GDP in 2010, breaching European Union rules.

'We will be well above four per cent in 2010,' Mr Steinbrueck said in an interview with the Financial Times Deutschland.

Under the EU's Stability and Growth Pact, euro zone members are bound to maintain public deficits below 3.0 per cent of GDP A sharp increase in deficit spending would stem mainly from an economic stimulus package announced on Tuesday by Chancellor Angela Merkel. At 50 billion euros (S$98 billion), it is the largest since 1945. -- AFP