The European Commission has raised its 2006 economic growth forecast for the euro zone.
In a twice-yearly economic forecast for countries in the European Union, the EU executive said growth in the 12-member euro zone would accelerate to 2.1 per cent this year from 1.3 per cent in 2005, up from a previous forecast of 1.9 per cent.
It cited a stronger German economy, robust investment and world growth despite expensive oil.
The commission's forecast is in line with the mid-point of the growth range forecast by the European Central Bank.
"Economic growth in 2006 will be underpinned by a strengthening of domestic demand, particularly investment in equipment," the commission said in a statement, adding soaring energy prices were the main external risk to the forecast.
"Exports will also continue to be supported by the strong expansion of the world economy and gains in competitiveness of EU companies in some member states," it said.
It saw growth in the first quarter of this year, doubling quarter-on-quarter to 0.6 per cent and remaining at that level for all four quarters of this year.
For the whole of the EU of 25 member states, the commission raised its growth forecast to 2.3 per cent this year from 1.6 per cent in 2005 and up from a previous forecast of 2.1 per cent.
That would still be half the world growth rate of 4.6 per cent in 2005 and 2006, as forecast by the EU executive.
Europe's biggest economy Germany will be the main driver of growth as its expansion will almost double this year to 1.7 per cent against 0.9 per cent in 2005, the commission said.
But a slump in German growth to 1.0 per cent in 2007 due to a Value Added Tax increase will also pull down the growth rate of the whole euro zone to 1.8 per cent, the commission forecast, cutting its November projection of 2.1 per cent growth next year.