* Orders rise 1.8% m/m

* Forecast was for 1.0% increase

BERLIN, March 7 (Reuters) - German industrial orders rose by more than expected in January, driven by strong demand from abroad, data showed on Monday in a robust start to the year for the engine room of Europe's largest economy.

Orders for industrial goods rose 1.8% on the month in seasonally adjusted terms after a revised increase of 3.0% in December, figures from the Federal Statistics Office showed.

A Reuters poll of analysts had pointed to an increase of 1.0% on the month in January.

Commenting on Monday's orders data, the Economy Ministry said in a statement that "the current geopolitical developments harbor enormous uncertainties regarding the further development of demand."

"It is also uncertain to what extent producers will be able to meet the high order backlogs in the near future in view of supply bottlenecks and material shortages," the ministry added.

A survey published last Tuesday showed a sharp rise in new orders drove expansion of Germany's manufacturing sector in February, although rising tension between Russia and Ukraine was starting to affect business sentiment.

In response to Russia's invasion of Ukraine, Chancellor Olaf Scholz has pledged to sharply increase German defense spending to more than 2% of economic output.

Thomas Gitzel, chief economist at VP Bank Group, said the increase in defense spending would be supportive for German industry.

"From an economic point of view, it is true that rising defense spending has always had a positive effect on German industry, which is heavily dependent on mechanical engineering," he said. "The multiplier effects are enormous."

Rising energy prices were fueling fears of a recession but would accelerate an energy turnaround to reduce dependence on Russian energy imports, Gitzel added.

Separate data released on Monday showed German retail sales rose in January, partially recovering from a December slump despite strict coronavirus restrictions still being in place.

(Writing by Paul Carrel; editing by Miranda Murray and Jason Neely)