The German economy is set to expand by just 0.6 percent next year as uncertainty from the eurozone debt places a strain on economic activity in Europe's biggest economy, the Bundesbank said on Friday.

"Following a 3.0-percent rise in economic output in the current year, the pace of expansion in Germany is likely to fall perceptibly to 0.6 percent in
2012," the German central bank wrote in its regular monthly report.

Previously, the Bundesbank had been pencilling in growth of 0.75 percent for next year.

The project was based on the assumption that there would be no further significant escalation of the government debt crisis, the central bank said.

It was working from a baseline scenario where current uncertainty on the part of investors and consumers would "gradually recede somewhat", enabling the euro area to gradually return to a sound growth path, the Bundesbank wrote.

"Under these conditions, Germany might see gross domestic product growth of 1.8 percent in 2013," which effectively meant the German economy "would be operating, by and large, at normal capacity," it said.

channelnewsasia.com