The German economy was expected to rise 3.7 percent in 2010 and 2.2 percent next year with a lower budget deficit and unemployment according to a report from the government' s economic council released Wednesday.

The council, also known as the "five wise men," was established in 1963 to provide advice for the government on economic policies.

The prediction was more optimistic than government's annual forecast published last month with a 3.4-percent increase this year and 1.8 percent next year.

The German economy suffered a sharp contraction of 4.7 percent last year, while the quick recovery offers a chance for "a stable but rather slower growth in the future," the report said.

The report expected the budget deficit will stay at 3.7 percent of GDP this year and slide to 2.4 percent of GDP next year.

Wolfgang Franz, head of the advisers, said the policies pushed by the government to strengthen international financial regulations and domestic budget consolidation can support future flat economic growth.

Unemployment was expected to continue its downward trend and the people out of work will be below the 3 million psychological line next year, the report said.

People's Daily