UPDATE: July ZEW Econ Expectations 39.5 Vs 44.8 In June

MANNHEIM, Germany -- German economic sentiment fell in July, confirming forecasts that the country's gross domestic product is set to decline 6% this year, the Center for European Economic Research said Tuesday.

Economic expectations for the six months to come fell to 39.5 after registering 44.8 in June, the think-tank, known as ZEW after its German initials, said.

It was the first drop since October.

This compares with expectations for an increase averaging 47.4 in a Dow Jones Newswires poll of economists.

"A considerable risk for the future development of the German economy is whether lending to firms and households" functions, ZEW said.

"The indicator confirms that growth will be flat in both the third and fourth quarter" this year, said Michael Schroeder, head of ZEW's financial markets department. Accordingly, Europe's largest economy is likely to shrink by around 6% this year.

Experts' assessment of the current conditions in July was stabilizing at low levels, coming in at -89.3 after recording -89.7 in the previous month.

Roughly 80% of the 289 experts in the sample expect the European Central Bank to hold rates steady over the six months to come.