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Germany raises growth forecast to 2.3pc

Germany raised its 2011 growth forecast by half a percentage point to 2.3pc yesterday, predicting the recovery in Europe's powerhouse will broaden and that previously sluggish domestic demand will pick up.

The economy ministry's forecast was slightly below a Reuters poll forecast yesterday for a 2.5pc expansion in 2011, though some economists expect growth to be almost as strong as last year's 3.6pc.

"The German pick-up is extra large. Now we have to make sure it's extra long," Economy Minister Rainer Bruederle said. "The time of nerve-wracking stop-and-go is over. Now we can put our foot on the accelerator."

Germany's rebound from its sharpest post-war recession has been surprisingly strong, marking its fastest growth last year since reunification and leaving eurozone peers trailing.

Recent bullish data has bolstered expectations Germany's strong run will continue, while eurozone nations like Ireland, Greece and Portugal are being held back as they struggle with a sovereign debt crisis.

The ZEW think-tank's gauge of German investor sentiment this month surged past expectations, reflecting confidence the industrial sector will create jobs and spur investment.

As economic recovery has boosted the labour market, the government predicts the unemployment rate will fall to 7pc this year from an average of 7.7 pc last year. That would help spur private consumption, Bruederle said, which is much needed to offset an expected slowdown in exports.

The government sees exports rising by 6.5pc this year, down from a previous forecast of 8pc, while imports were seen up 6.4pc after a previous estimate of 7.7pc.

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