ZEW's Investor Confidence Index had risen for the second month in a row to 16.1 points in December, after gaining to 10.4 points in November, the economic think tank said in a statement Friday.

ZEW president Clemens Fuest said confidence was growing that Europe's largest economy was "sufficiently robust to meet the challenges in the coming year."

"The large influx of refugees is above all a major challenge facing policy-makers and civil society, and the economic slowdown in emerging markets is exerting pressure on the German export industry," he added.

ZEW regularly questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

According to ZEW data, the sub-index measuring financial market players' view of the current economic situation in Germany was largely unchanged, edging up by 0.6 point to 55.0 points.

Beating expectations

Analysts said the headline index was slightly higher than they had expected. Jennifer McKeown from Capital Economics told the news agency AFP that the "solid rise" suggested the German economy was "faring pretty well." The data would support earlier evidence that "neither the Volkswagen scandal nor the Paris attacks" had taken a significant toll.

But since the current level was still lower than during the first half of the year, McKeown said this would point toward a slowdown in German economic growth from 1.5 percent this year to 1.2 percent in 2016.

ING DiBa analyst Carsten Brzeski said investors appeared to have "somehow overcome their disappointment after the European Central Bank meeting and have become more optimistic about the growth prospects of the German economy."

At its meeting earlier this month, the ECB trimmed back one of its key interest rates slightly and extended its bond purchase program for another six months, but investors had been expecting much more robust action to tackle the stubbornly low level of inflation in the euro area.

Brzeski noted that the ZEW index had "a rather poor track record when it comes to predicting GDP growth." However, despite "another very turbulent year" with the Greek crisis, the Chinese slowdown, the refugee influx and increased geopolitical tensions, the German economy had continued its solid growth performance," he said.

"Domestic demand, and in particular private consumption, has become an important growth driver. Looking ahead, the economy should continue its current positive, though not breathtakingly strong, momentum next year," Brzeski added.

uhe/pad (Reuters, dpa, AFP)