BERLIN (AP) -- The German government on Thursday raised slightly its growth forecast for this year, though it still expects Europe's biggest economy to expand by only 0.5 percent.
The new forecast compares with the previous prediction in January of 0.4 percent growth. The economy grew by 0.7 percent in 2012 — much slower than the two previous years but still a contrast with recessions elsewhere in Europe.
The government left its prediction of 1.6 percent growth next year unchanged. Its traditionally cautious forecast falls short of a recent prediction by leading economists that the economy will expand 0.8 percent this year and 1.9 percent next.
The economy shrank in last year's final quarter but is believed to have "grown modestly" in the first quarter, Vice Chancellor Philipp Roesler said.
"Germany is leaving the economic winter successfully behind it — things are looking up again," Roesler, who is also the economy minister, told reporters.
Some recent indicators have painted a less promising picture. On Wednesday, a closely watched survey of business confidence fell more sharply than expected.
However, Roesler said there were "hard indications" of an impending increase in investment by companies and downplayed the poor business confidence report, arguing the latest drop was a "normalization" after several recent rises.
The latest government projections foresee a 1.5 percent increase this year in exports, a traditional German strength, accelerating to 5 percent next year. Domestic demand, which dipped in 2012, is expected to rise 0.7 percent this year and 1.6 percent next.
Germany faces elections in September, and Roesler dismissed mounting calls elsewhere in Europe to tone down an austerity drive that's become increasingly unpopular in other countries. He insisted that solid public finances are key to restoring stability.
"This government will always stand firm on this point, and we are greatly concerned," he said. "I would like to warn all partners inside Europe against softening this course of consolidation."