BERLIN, June 28 Germany's economy will grow sluggishly over the summer due to uncertainty over the euro zone debt crisis but it will pick up in the fourth quarter, the Ifo institute said on Thursday, forecasting just 0.7 percent full-year expansion.
Domestic demand will drive growth of 1.3 percent next year, Ifo said, with private consumption likely to rise 1.5 percent due to higher incomes and the solid labour market.
"The German economy will likely go through a period of weakness in the summer half-year," Ifo said in its statement. "The reason for this is continuing uncertainty over the continuation of the European debt crisis."
"The economy should pick up next year, driven by domestic demand, as long as the European debt crisis does not escalate much. Employment should rise during the whole time-frame."
Data earlier on Thursday showed the number of Germans in work rose by 37,000 in May to 41.54 million.
Ifo belongs to a consortium of top institutes that in April forecast 0.9 percent growth for Germany this year and 2.0 percent growth next year.
The institute's closely-watched business sentiment survey showed last week morale fell for a second straight month in June to its lowest level in over two years. (Reporting By Sarah Marsh)