Germany's next government can expect continued growth, according to a closely-watched economic forecast, presented on Thursday by five of the country's leading economic research institutes.

The study lifted its prognosis for gross domestic product (GDP) growth in 2017 from 1.5 to 1.9 percent. The forecast for 2018 was raised by 0.2 percentage point to 2 percent, while the estimate for 2019 was given at 1.8 percent.

The findings were compiled by the Munich-based Ifo Institute for Economic Research, the German Institute for Economic Research (DIW) in Berlin, the RWI Institute in Essen, the Institute for the World Economy (IfW) in Kiel and the Halle Institute for Economic Research (IWH).

The institutes' joint diagnosis is released twice a year and serves as a basis for the German government's official forecasts. Given Germany's surprisingly strong economic performance in the first half of 2017, an upward correction was widely anticipated.

Contrary to some earlier suggestions, Thursday's study rejected notions that the economy was overheating. Despite the European Central Bank's (ECB) ultra-loose monetary policy, rates of increase for wages and prices were still too low to support fears that growth had become excessive.

The joint diagnosis warned, however, that individual signs of strain were apparent in the labor market and in the construction sector.

Germany was creeping closer and closer to full employment which meant that hundreds of thousands of vacancies could not be filled. The study predicted that the number of unemployed Germans would fall below 2.5 million for the first time since 1991 in 2018 and continue to decrease thereafter. Construction firms were also already operating at the limits of their capacity.

Domestic consumption was identified as a key driver of growth, even though its significance for the overall development was lower than last year when historically-low oil prices boosted spending power.

International trade made a bigger positive contribution to GDP than the researchers feared would have been the case in light of Brexit and growing U.S. protectionism. Germany hereby benefited from a stronger-than-expected Eurozone recovery, not least due to the ECB's ongoing quantitative easing program.

The study recommended to the Euro-area's Frankfurt-based monetary authorities to gradually reduce the level its bonds purchases. The authors did not expect an interest rate hike before 2019.

The institutes gave a mixed verdict on Chancellor Angela Merkel's departing government in their report. The positive development of public finances was largely owed to the ECB's policy rather than German lawmaker's efforts.

The joint diagnosis forecasts that Germany will record another budget surplus worth 28 billion euros (33 billion U.S. dollars) in 2017. The government was advised to use funds thus made available to reduce the fiscal burden shouldered by German citizens.

Merkel's CDU/CSU bloc, business-friendly Free Democratic Party and Green parties, all of which are widely anticipated to join a new coalition, had promised to lower taxes to voters on the campaign trail.