Reuters reports that the German government's planned 130 billion euro (116.4 billion pounds) stimulus programme could boost economic output in Europe's largest economy by 1.3 percentage points both this year and next, the DIW institute said on Thursday.

DIW forecast the economy would contract by 9.4% this year as the coronavirus pandemic takes its toll before expanding by 3% next year - all under the assumption that the pandemic is sustainably contained.

But it said the government's latest economic stimulus package was noticeably supporting the economy and added that if the programme were implemented as announced, economic output would fall less sharply - by 8.1% this year - and rise by 4.3% next year.

DIW said gross domestic product would fall much further in the second quarter than during the first, when it dropped by 2.2% - the steepest rate since 2009.

But the institute said the economy would pick up again, albeit very slowly, from the third quarter as restrictions to contain the spread of the coronavirus are eased.