The German economy is overcoming a pandemic-induced slump and will grow briskly this year and the next, the country's central bank said today as it lifted its GDP and inflation forecasts for both years.

The Bundesbank now expects the German economy to grow by 3.7% this year, above an earlier forecast for 3%, while for next year it raised its growth projection to 5.2% from 4.5%.

In 2023, it see growth at 1.7%.

"The German economy is overcoming the pandemic-related crisis," Bundesbank President Jens Weidmann said.

The Bundesbank's forecasts assume that the pandemic will be contained quickly and durably by the vaccination campaign and that curbs to activity will be quickly relaxed.

"This ensures strong catch-up effects, especially in the service sectors that were previously particularly impaired and in private consumption," Weidmann added.

German inflation is now seen at 2.6% this year, up from 1.8% seen previously.

Inflation will then slow to 1.8% next year and 1.7% in 2023, the Bundesbank predicted.