By Nina Adam

FRANKFURT--Leading German think tanks on Thursday raised growth projections for Europe's largest economy for this year but trimmed their expectations for 2017.

They forecast growth of 1.9 % in 2016, compared with April's prediction of 1.6%. Germany's economic growth rate is expected to ease to 1.4% in 2017, compared with an earlier estimate of 1.5%, but recover slightly to 1.6% in 2018.

Germany's "moderate" upswing is underpinned by a solid labor market and buoyant consumption, the Munich-based Ifo institute, the Essen-based RWI, the DIW in Berlin, the IWH in Halle and the IfW in Kiel said in a joint research report. But the U.K.'s pending exit from the European Union could potentially undermine economic activity, weighing on exports and investment, they said.

The report confirmed that Germany's economy is in "a robust condition," said Economy Minister Sigmar Gabriel.

The think tanks also forecast that the national budget surplus will fall to 20.1 billion euros ($22.5 billion) this year from EUR22.6 billion in 2015. For 2017 and 2018, they forecast surpluses of EUR13.7 billion and EUR16 billion, respectively. Germany's current-account surplus is expected to hit 8.8% of gross domestic product this year, but ease to 8.4% in 2018.

Mr. Gabriel, who is also vice chancellor, said that the projected budget surplus as well as historically low interest rates "offer room for maneuver," which should be used wisely. "I share the view of the institutes that the integration and qualification of migrants, as well as investment in education and research represent key tasks that we should face head-on," he said.

Write to Nina Adam at nina.adam@wsj.com

(END) Dow Jones Newswires

September 29, 2016 07:17 ET (11:17 GMT)