(Recasts with deputy economy minister)
By Paul Carrel and Gernot Heller
BERLIN, Nov 13 (Reuters) - Germany fell into recession in the third quarter when its economy shrank by a much sharper than expected 0.5 percent, and a top official said the outlook for final three months of 2008 is little better.
The contraction in gross domestic product (GDP) was more than twice the 0.2 percent forecast and met with calls on Thursday for the government to beef up a stimulus package it expects to generate investments and contracts of up to 50 billion euros ($63.12 billion).
The recession in Germany, Europe's biggest economy, bodes ill for euro zone GDP figures due on Friday.
Germany is the world's top exporter of goods and its Federal Statistics Office said third quarter economic output had been squeezed by lack of export growth while imports continued to rise, more than offsetting a slight rise in private and public consumption.
"If you think today's numbers are already bad, just wait for the next quarter," said ING Financial Markets' Carsten Brzeski. "The headwinds of the financial crisis and the global economic slowdown are blowing right in the face of the German economy."
The economy last shrank for two straight quarters in the first half of 2003, the Office said. That contraction followed negative growth in the final quarter of 2002 -- making for the economy's weakest patch since reunification in 1990.
Deputy Economy Minister Walther Otremba said Germany faced a protracted slump after the third-quarter contraction.
"Indicators suggest the negative (growth) will hardly change in the fourth quarter," Otremba told Reuters, adding that recent financial turmoil was not reflected in the third quarter data.
"We are going to have to face up to a very difficult and long-lasting economic crisis," Otremba added.
Germany's fortunes are crucial to the performance of the overall euro zone. A Reuters poll carried out before the German data had pointed to a 0.2-percent contraction in third-quarter euro area GDP data, due on Friday, which would put the 15-nation currency zone in recession.
EURO ZONE WEAKNESS
The German figures led some economists to lower their sights for the euro zone GDP figures.
"We had expected a decline of 0.2 percent for euro zone GDP too, but this data mean it could well be weaker than expected, possibly shrinking by 0.3 or even 0.4 percent," said Klaus Schruefer, economist at SEB bank.
The weak economic prospects underlined by the German GDP figure helped euro zone government bond prices edge higher.
Germany has been the world's largest exporter of goods since 2003, profiting from a period of strong global growth. But as boom turns to bust in many export markets, its large exposure to the global economy means Germany is suffering.
To limit the damage, Chancellor Angela Merkel's government has unveiled a package of targeted measures they say could generate investments and contracts of up to 50 billion euros.
Klaus-Peter Mueller, head of Germany's banking association, welcomed the package but urged the government to do more.
"It would be important not just to favour individual sectors, but to take further steps that promote growth -- and employment," Mueller said in the speech of a text for delivery at a congress in Berlin.
In a sign of how Germany's big companies are suffering, carmaker Daimler said last month it would shut two big German plants for a month due to a sharp drop in demand.
Auto parts maker Robert Bosch GmbH said last week it would shorten the working week for 3,500 workers at a plant in Germany for six months.
"We have problems in the automotive sector -- there is no doubt -- because of the U.S. market," Anton Boerner, president of the BGA exporters' association, told Reuters Television.
In a spot of positive news from the German economy, engineering group Siemens on Thursday maintained its financial targets for the 2008/2009 business year after fourth-quarter new orders rose four percent.
Germany's statistics office revised second-quarter GDP data to show a contraction of 0.4 percent, compared with 0.5 percent previously reported. The office is due to publish a breakdown of the third-quarter GDP figures on Nov. 25. (Reporting by Dave Graham, Noah Barkin and Kerstin Gehmlich; Editing by Ruth Pitchford)