Germany's recovery will likely continue in the second half of the year although at a slower pace as foreign demand decelerates, the German finance ministry said in its monthly report today.
Europe's largest economy last week posted growth of 2.2 per cent in the second quarter - the fastest expansion since reunification - smashing expectations.
The government will therefore have to considerably modify its official forecast for full year growth, which currently stands at 1.4 per cent, the ministry said.
The Bundesbank said yesterday Germany would see growth of some 3 per cent in 2010, up from the 2 per cent it forecast in June, bringing the central bank broadly into line with market expectations.
"Monthly economic indicators point to the German economy's positive start to the third quarter," the ministry said, adding that the upswing was broadening, with private consumption and investments contributing to growth as well as exports.
"Yet economic momentum will likely be considerably less strong in the second half of the year than in the first."
The ministry said the continued recovery on the labour market would likely further boost private consumption. German unemployment fell in July to its lowest level since November 2008, declining for the 13th consecutive month.
However, the stimulus foreign demand provided to the German economy could well ease slightly in the second half of the year, the ministry said.
The tax take from Germany's federal government and states looks likely to be better than expected.
The tax take fell 0.9 per cent between January and July compared to the same period a year earlier. A panel of tax experts had earlier predicted the tax take to fall 2.6 per cent over the whole year.
Revenue from the corporate tax paid by big companies rose 25.6 per cent in the January to July period.
Germany emerged from its deepest post-war recession in the second quarter of last year, fuelled mainly by a powerful rally in manufacturing exports.