Germany's Ifo economic institute is likely to report that business confidence rose for the second consecutive month in January in its monthly report to be issued this morning.

The news comes after a leaked government forecast predicted that Europe's largest economy would grow by only 0.75 per cent in 2002 but is likely to begin recovering in the second half of the year.

The 2002 Economic Forecast, leaked to a Sunday newspaper, makes grim reading for the German government as it prepares to face voters in the autumn.

Any economic recovery is unlikely to register before polling day in September, while unemployment will rise above the politically sensitive four million mark before then. The government expects the annual unemployment rate this year to be 3.85 million.

The Finance Minister, Mr Hans Eichel, will present the 135-page report to the cabinet on Wednesday. According to the leaked forecast, he has revised down this year's growth estimate from 1.25 per cent to just 0.75 per cent, in line with leading German economists.

The German economy grew by 0.6 per cent last year, the slowest level of growth since 1993.