Germany's economic sentiment has decreased significantly in September and the country is "slipping into recession," the Munich-based Ifo Institute for Economic Research said on Monday.

The Ifo Business Climate Index dropped to 84.3 points in September from 88.6 points in August, it said, adding that this is the lowest level since May 2020.

In the manufacturing sector, the index fell “tangibly” and firms were less satisfied with their current business, it said, adding: “They are definitely worried about the coming six months.”

"In the service sector, the Business Climate Index took a nosedive," the institute said.

"For the first time since February 2021, the business situation is back in negative territory," it added.