German economic think-tank Deutsches Institut fuer Wirtschaftsforschung (DIW) said it expects German GDP will grow 1.8 pct this year, the highest level since 2000, as the recovery in the euro zone's biggest economy is gaining pace. GDP growth is then likely to dip to 1.4 pct in 2007 amid weaker consumer demand, the institute said in its latest economic report."The German economy is gaining significant momentum this year," it said. "Economic growth is not only rising, but also broadening." Unlike before, economic growth is now being supported by a stronger domestic economy, which is likely to make a slightly bigger contribution to growth this year than the still dynamic exports, DIW said. Investments and consumption are expected to contribute nearly equally to economic growth, it added. In late April, Germany's six leading research institutes -- including DIW -- said they expect GDP growth of 1.8 pct this year and 1.2 pct next year. DIW also said it expects Germany's deficit to fall to 2.7 pct of GDP this year from 3.3 pct in 2005 on the back of rising corporate tax revenues and the 3-percentage point increase in value-added tax (VAT) next year. This means DIW expects the deficit to come in below the Stability and Growth Pact's 3 pct of GDP threshold for the first time in four years.In 2007, the deficit is seen declining further to 1.8 pct of GDP. The German government has pledged to bring the deficit within the 3 pct limit next year.