Germany's economy will grow 3.1 percent in 2011, pulled by both exports and private consumption, said Bundesbank, the German central bank, on Friday.
"The recovery of the German economy has evolved into a broad- based upturn. Overall production capacity utilization has returned to normal levels," Bundesbank observed.
The economy is expected to expand by 3.1 percent in 2011 and 1. 8 percent in 2012, higher than the previous expectation of 2.5 percent and 1.5 percent respectively, said the central bank.
Bundesbank said that along with the economic expansion, firms are more willing to hire new staff, which will reduce the number of people without work to well below three million and bring the unemployment rate down to 6.5 percent in 2012.
Germany enjoyed a V-type rebound last year as the economy grew 3.6 percent, driven by both exports and private consumption.
These two engines continued to play positive roles this year, Bundesbank said.
The bank also noted that inflation in Germany is likely to rise fairly sharply in 2011 and 2012, mainly due to much higher energy prices, but also because of increasing overall capacity utilization.
On average, the inflation rate for 2011 will be 2.5 percent, but in 2012 it will fall back to 1.8 percent, it said.