On the backdrop of lowered unemployment and strong economic upturn, Germany's leading think tanks and its central bank have raised one after another their growth predictions for this year and next.

The central bank, the Bundesbank, expected Thursday the German economy to expand by about 2.75 percent this year.

Axel Weber, the bank's president, said in a speech at an economic forum in Hamburg, the German economy "has developed very positively this year" and the annual growth rate for the whole year "should therefore stand at around two-and-three-quarter percent, well above potential". The bank raised growth forecast from 1.0 percent to between 1.25 and 1.5 percent in 2007.

But he admitted that domestic consumption remained weak though relatively improved.

"There is still no sign of a deep recovery in consumption, even if there have been improvements on this front recently," Weber said, "In the traditional retail sector, developments are still weak."

On growth next year, Weber said he was projecting the current upturn to weaken but not break down altogether.

"The fundamental trend will remain intact, even if the rise in value-added tax on Jan. 1 will have a substantial braking effect on the economy," he said.

The German government has planned to raise VAT from the 16 percent to 19 percent from next month, the biggest-ever single VAT rise.

On the same day, German economists expressed optimism about the outlook for the economy nest year, lowering the impact of the VAT increase on its growth.

Releasing its latest report on the German economy, leading Munich-based ifo economic institute raised its prediction from 1.7 percent to 1.9 percent in 2007.

The institute forecast that the biggest economy in Europe will grow 2.3 percent in 2008.

Hans-Werner Sinn of the institute said that current climate is fantastic, adding, "We are extraordinarily optimistic."

Essen-based RWI also lifted its forecast for 2007 from 1.7 percent to 19 percent, following the suit of Kiel-based Institute for the World Economy (IfW), which doubled last week its prediction from 1.0 to 2.1 percent for next year.

German unemployment kept falling in recent months.

In November, the jobless rate dropped more than expected to 10. 2 percent, according to the Federal Statistics Office.