The Ifo institute upgraded its German economic growth for 2016 on Wednesday. Germany's economy is expected to expand 1.7% this year, 1.9% in 2016, up from the previous estimate of 1.8%, and 1.7% in 2017.

The Ifo institute expects private consumption to remain the main driver.

"The upturn in the German economy is continuing. Private consumption continues to drive the upturn, since the income outlook of private households remains good due to further improvements in the labour market. This effect is compounded by higher, credit-financed government spending on refugees, which is creating a temporary uptick in demand at the expense of future demand," Ifo President Hans-Werner Sinn said.

Inflation is expected to be 0.3% this year, 1.0% in 2016 and 1.5% in 2017.