The German government has slightly scaled back its headline economic growth forecast for the current year.
But it has insisted that the recovery remains intact and will strengthen as domestic demand picked up.
Unveiling the latest updated forecasts, economy minister Wolfgang Clement said the German government was pencilling in headline gross domestic product growth of 1.6% this year, down slightly from the 1.7% recorded in 2004, and a slight downward revision from the previous 2005 forecast of 1.7%.
Clement said domestic demand, the main weak point in the German economy, would pick up by 1.2%, with household spending forecast to rise by 0.7%, after contracting by 0.3% in 2004.
The rebound in domestic demand would help make up for a slowdown in previously buoyant export growth. Exports were expected to grow by 6.5% in 2005, compared with growth of 8.2% in 2004.
Meanwhile, a closely watched survey has shown that German business confidence improved slightly in January, after a sharp increase in December.
The business climate index, calculated each month by the Ifo economic research institute, edged up to 96.4 points in January, its highest level in 11 months. The barometer had already risen sharply by 2.1 points to 96.2 points in December.
'The slight increase this month confirms the sharp rise seen the previous month,' Ifo president Hans-Werner Sinn said.
For its monthly survey, Ifo polls around 7,000 companies about their assessment of current business and their expectations for the next six months.
A breakdown of the data showed that companies were feeling less confident about their current situation but a great deal more confident about the outlook for the next six months.
