Germany's five top economic research bodies say prospects for the country's economy remain favourable even though expansion could slow because of taxes and higher interest rates.
In their traditional spring report, the bodies sharply upgraded their forecasts for German growth this year and next year to 2.4%. They also predicted that Germany, the euro zone's biggest economy, would achieve a balanced budget by 2008.
'The current upturn will continue, but the pace of expansion will be slower than last year,' the institutes said. The five institutes expected the ECB to raise its key interest rate by a further 0.25 points this summer to 4%.
Contributing to growth of 2.4% this year - in their previous report last autumn, the institutes had projected growth of just 1.4% for 2007 - would be strong domestic demand, they said.
The strong economic performance would lead to an improvement on the labour market, with the annual average jobless total set to fall below four million for the first time since 2001.
