Germany's economic growth slowed to 0.2% last year, its lowest annual rate since the recession in 1993.

Growth slowed from 0.6% in 2001 and was well below the government's forecast of 0.5%.

"Overall economic development in Germany in 2002 was disappointing, as in previous years," Federal Statistics Office chief Johann Hahlen said in a statement.

Germany is the largest economy in the eurozone and risks dragging its peers into more sluggish growth.

The sorry state of the economy poses a real challenge to the newly elected centre-left government led by Chancellor Gerhard Schroeder.

And the threat of a US-led war against Iraq is likely to delay any hopes of a swift recovery.

Struggling firms

The meagre growth was almost entirely due to exports rather than strong local demand, the statement said.

"Declining demand in German firms affected not only their investment but their demand for goods from the rest of the world," Mr Hahlen said.

There was no figure yet available for growth in the last three months of the year, but it was expected to have been stagnant.

In 1993, the economy shrank by 1.1%

Telling-off

The figures also revealed the state of Germany's controversial budget deficit.

The deficit widened to 3.7% of economic output, well above the limit set in an agreement which underpins the euro.

The deficit ration was significantly higher than the 2.8% in 2001.

Germany has already been rapped by the European Commission for its failure to get its finances in order.