The Bundesbank released its latest forecast for 1.6-percent growth in gross domestic product (GDP) next year and 1.2 percent in 2011.
"The outlook for the German economy has gotten noticeably brighter in recent months," the bank said, though it still expects a record post-war contraction of 4.9 percent this year.
After slumping sharply in the first three months of 2009, the economy pulled out of recession in the second quarter, thanks in large part to government stimulus measures.
The rebound will "continue in the next two years, though at a moderate pace," the central bank said.
Analysts at Germany's biggest private, Deutsche Bank, also forecast a contraction of 4.9 percent this year, but stronger growth of 2.1 percent and 1.4 percent respectively in 2010 and 2011.
A forecast of private-sector economists compiled by Dow Jones Newswires saw German growth of up to 2.0 percent in 2011, meanwhile.
The country's export-orientated economy took a hit from the global economic slowdown but is now set to benefit from renewed demand for capital goods such
as machine tools and chemicals used to produce finished products.
The German government has also approved a fiscal stimulus package worth up to €21 billion in 2010, including €18 billion in tax relief for private households that should underpin consumer spending.
Unemployment in Germany has been limited meanwhile by the country's short-time work scheme under which the state subsidises shorter hours for workers to avoid widespread lay-offs. Various measures contained in the plan are due to run until mid 2012 at the latest.
The number of jobless is nonetheless expected to reach more than 3.8 million people next year, and 4.2 million in 2011. In November, it stood at 3.2 million, or 7.6 percent of the workforce.