The Bundesbank said that Germany's economic recovery this year may not be as strong as originally expected, as the situation of the COVID-19 epidemic is still uncertain.

"the slowdown in Delta strain and vaccination may lead to stricter protective measures," the agency said in its monthly report on Monday. " It also said that after disappointing economic activity in the first half of the year, economic growth in 2021 was likely to be "slightly lower" than the 3.7 per cent forecast in June.

Although Germany initially outperformed the rest of Europe during the months of blockade, German manufacturing has recently been hampered by raw material shortages and other supply chain bottlenecks. By contrast, services such as restaurants have been boosted by looser restrictions, which should help achieve rapid growth in the third quarter.

The Bundesbank said consumer prices also faced uncertainty. Inflation is expected to accelerate to 5 per cent this year and then slow again as temporary factors begin to fade.

The central bank said higher supply chain costs were passed on to consumers more than expected. Whether the trend will continue depends on the extent to which companies' profit margins will be under pressure from "broader price and wage increases".

Overall, the economy should reach its pre-epidemic size by this summer or fall, the report said.