Provisional figures show that the German economy shrank by 5% last year, its deepest recession since World War II.
The figures were released by the country's national statistics service. Europe's biggest economy had grown by 1.3% in 2008, and the Bundesbank estimated last month that it should grow again by 1.6% in 2010.
The German government also recorded a public deficit of 3.2% of economic output last year after managing to balance its accounts in 2008, the Destatis service said.
After slumping sharply in the first three months of 2009, economic activity rebounded in the second quarter, thanks largely to government stimulus measures.
The country's export-orientated economy took a hit from the global economic slowdown but is set to benefit from renewed emerging market demand for capital goods such as machine tools and chemicals.
The German government has also approved a budgetary stimulus package worth up to €21 billion in 2010, including €18 billion in tax relief for private households that should underpin consumer spending.
Unemployment in Germany has also been limited by the country's short-time work scheme under which the state subsidises shorter hours for workers to avoid widespread lay-offs. The number of jobless is nonetheless expected to reach more than 3.8 million people this year, and 4.2 million in 2011. It averaged 3.42 million, or 8.2% of the workforce, in 2009.
