Germany's key banking association added its voice Wednesday to the growing list of groups ruling out a sharp downturn in Europe's biggest economy this year.

German Banking Association chief Manfred Weber conceded that the global credit crunch, slackening world growth and resurgent inflation were likely to result in the nation turning in a weak economic performance in the runup to the end of the year.

But he said: "Economic collapse scenarios, which the negative trend of economic indicators simply continues, are however exaggerated."

After clocking up a growth rate of 1.3 per cent during the first three months of the year, the German economy contracted by 0.5 per cent during the second quarter, as a result fueling fears that the nation could be heading for a sharp economic slowdown.

However, Weber, who was releasing the association's latest monthly economic bulletin in Berlin, said Germany enjoys the best economic fundamentals since the New Economy boom seven years ago.

In particular, Weber argued that a fall in both oil prices and the euro from record highs had helped to ease some of the recent pressure on the German economy.

German investor confidence posted a surprise rebound in August, the key ZEW indicator released Tuesday showed while Germany's wholesalers and exporters association (BGA) predicted the country's economy would expand by 1.7 per cent in 2008 but slow to less than 1 per cent next year.

Releasing the investor confidence survey, ZEW institute president Wolfgang Franz said: "The financial market experts have for good reason not been impressed by the negative gross domestic product (GDP) growth rate in the second quarter of 2008.

"Overall, they reckon with a weaker, but all in all robust economic development and rightly do not fear a recession," he said.