The federal statistics office Destatis estimated that gross domestic product (GDP) contracted 0.5 percent in the last three months of 2012, after expanding by 0.5 percent in the first quarter, 0.3 percent in the second quarter and 0.2 percent in the third quarter.
Destatis is not scheduled to publish more precise fourth-quarter GDP data until next month.
But at the authority's annual news conference to present its estimates for full-year growth figures, Destatis' top statistician Norbert Räth gave a rough indication with respect to the fourth quarter.
"The full-year growth figure (of 0.7 percent) implies a contraction of around half a percentage point in the fourth quarter," Räth said.
Despite the sharp slowdown in growth in the second half of last year, Destatis president Roderich Egeler pointed out that Germany was still faring much better than most of its European neighbours, many of which were in recession.
"Overall, the German economy proved itself to be very robust," Egeler said. "Despite the European economic crisis, GDP expanded by 0.7 percent, driven particularly by robust foreign trade as well as domestic consumption," Egeler said.
For the first time for five years, the overall state budget -- which covers both the German government, the regional and municipal authorities, as well as the social welfare administration -- showed a surplus of €2.2 billion ($2.9 billion), equivalent to 0.1 percent of GDP, Egeler added. In 2011, the overall state budget had shown a deficit ratio of 0.8 percent.
But the German government is reportedly expecting growth of only 0.5 percent this year, as the ongoing eurozone crisis drags on Europe's largest economy.
The business daily Handelsblatt reported on Tuesday that Berlin will slash its previous growth forecast in half in its annual economic report due out later this week.
However, government officials see light at the end of the tunnel, penciling in gross domestic product growth of 1.25 percent in the final quarter of 2013. And the German labour market is expected to remain largely unscathed by the economic slowdown this year.
The prognosis assumes Europe’s sovereign debt crisis will continue to fester but not worsen dramatically, which would unsettle financial markets.
“The ongoing debt crisis in some eurozone countries still remains the biggest risk,” the paper quoted the report as saying.