Berlin  - After a solid start to the year, the German economy should turn in a better performance in 2008 than previously expected with the nation's influential central bank raising its economic forecast Friday.

Instead of 1.9 per cent as previously projected by the Bundesbank the Frankfurt-based central bank now expects Europe's biggest economy to clock up a 2.25 per cent growth rate this year.

However, in its monthly report the Bundesbank also warned about the threat to growth posed by surging inflation and the strong euro, which hit an all-time high topping 1.60 dollars last month as a result increasing the competitive pressures facing Germany's key export machine.

The nation's economic growth should slow in 2009, with the Bundesbank revising down its growth forecast for next year from 1.9 per cent to 1.25 per cent.

Inflation should remain high for the rest of the year, the Bundesbank warned and not fall below 3 per cent before the end of 2008. (dpa)