* Ifo index rises to 84.9 in May, beating analyst

expectations

* Economists warn growth outlook remains weak despite

improved sentiment

* Rising energy prices and global risks threaten fragile

recovery, economists say

(Adds GDP details and economist comments from paragraph 5)

By Maria Martinez

BERLIN, May 22 (Reuters) - German business morale

unexpectedly improved in May, a survey showed on Friday, but

economists warn that the outlook for Europe's biggest economy

remains fragile despite separate data confirming first-quarter

growth of 0.3%.

The Ifo institute said its business climate index rose to 84.9

compared to a revised 84.5 in April.

Analysts polled by Reuters had forecast a decrease to 84.2.

"Following the slump in March and April, business sentiment

in Germany has recovered slightly," Ifo President Clemens Fuest

said.

The Ifo index improved across all sectors, with the exception

of construction.

Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe,

said despite the signs of improvement, "sentiment remains stuck

in the basement". "The outlook for both the present and the

future remains gloomy."

GROWTH OUTLOOK REMAINS WEAK DESPITE IMPROVED SENTIMENT

Germany's economy, which has struggled to regain momentum since

the COVID-19 pandemic, grew 0.3% in the first quarter of 2026

compared with the previous quarter, the statistics office said

on Friday, defying the impact of the Iran war. A rise in exports

at the start of the year helped drive growth.

However, the surge in energy prices triggered by the war poses

a threat to its long-awaited recovery, some analysts said.

"The German economy is stabilising for the time being, but the

situation remains fragile," Fuest said.

Joerg Kraemer, chief economist at Commerzbank, said the economy

was likely to shrink in the second quarter.

Meanwhile, businesses were slightly more satisfied with their

current operations, with the index rising to 86.1 from 85.4 in

April.

The outlook for the coming months was also less pessimistic,

Ifo said, with the corresponding index rising to 83.8 from 83.5

in the previous month.

Carsten Brzeski, global head of macro at ING, sees a

complicated combination of downside risks in the near-term due

to the Middle East conflict and continued optimism on the back

of fiscal stimulus further down the line.

"A combination that, at least for now, should shield the

German economy against recession, but not against

near-stagnation," Brzeski said.

(Reporting by María Martínez; Editing by Thomas Seythal and

Emelia Sithole-Matarise)