Germany in March plunged into a recession set to last until the middle of the year, the economy ministry said Wednesday, as the government readied an extension of the virus-fighting curbs that sparked the slump until May 3.

With schools and most shops closed, travel halted and millions now working from home, Germany has been severely hit by the COVID-19 crisis.

As calls grow from industry for restrictions to be gradually eased, Chancellor Angela Merkel will hold talks this afternoon with state premiers on extending the curbs, which are currently due to run until April 19.

Regional government sources told AFP ahead of the talks that representatives from Germany's 16 states and the chancellery have agreed on a position paper which includes maintaining restrictions through May 3.

"Falling global demand, interruption of supply chains, changes in consumers' behaviour and uncertainty among investors" had already made themselves felt, the economy ministry said.

The economic blow from the virus fell just as Germany was beginning to recover from a 2019 marked by the impact of trade wars and Brexit fears. Industry in particular had seen rises in new orders and activity as 2020 got underway, the ministry noted.

The BA federal labour agency said some 725,000 companies had applied for the assistance, adding that the number of workers affected will likely be "significantly" above the 1.4 million helped in the 2008-2009 financial crisis. Berlin estimates that around 2.1 million workers will have to fall back on the support.