German firms are thoroughly integrated into the world economy
Germany has predicted that its economy will shrink by 2.25% in 2009, which would be its worst performance in the post-World War II era.
The downgraded forecast is much lower than the previous prediction of 0.2% growth, made in October.
Germany's economy accounts for about a third of eurozone output.
"There is no precedent in post-war history for this economic decline that we unfortunately have to forecast," said economy minister Michael Glos.
Mr Glos predicted that exports - a key factor in German growth in recent years - would slump by 8.9% this year.
He also said that the jobless rate would climb to an average of 8.4% in 2009, from 7.8% in 2008.
"The German economy is facing this year the greatest challenges since unification [in 1990]. Germany is integrated into the global economy like hardly any other industrialised country," added Mr Glos.
The economy slipped into recession in the third quarter of 2008.
Germany's Federal Statistical Office has said the economy grew by 1.3% in 2008, about half the rate of 2007.