The German government is set to revise upward its economic growth forecast for this year to a decline of less than 6 percent from a previous estimate of -6.3 percent, a coalition source told Reuters on Friday.
Economy Minister Peter Altmaier is scheduled to present the revised outlook early next week, the source added.
The German economy contracted by a record 9.7 percent in the second quarter as consumer spending, company investments and exports all collapsed at the height of the Covid-19 pandemic.
But recent economic data has fanned hopes that Europe's largest economy is set for a strong recovery.
Business morale improved more than expected in August as both manufacturing and services picked up steam. Export demand, especially from China, rebounded for a second month running in June, and a recent Ifo institute survey showed that manufacturers expect expansion over the coming three months.
The outlook for Germany's economy this year is also brighter than for most other G7 countries except the United States.
An upward revision to Germany's economic forecast will have an impact on its tax revenues estimate, due on Sept. 10, and its budget, which is to be presented by the end of September.
Sources had told Reuters in June that German Finance Minister Olaf Scholz will ask parliament to increase new borrowing by a further 62.5 billion euros ($74.33 billion) to a record 218.5 billion this year for measures to boost recovery from the coronavirus pandemic.
The plan underlines Germany's shift from Europe's austerity champion to one of the biggest spenders in the euro zone's efforts to rebound from the pandemic.
($1 = 0.8409 euros)