The Bundesbank said on Monday the latest wave of the coronavirus pandemic risked pushing the German economy – Europe’s largest – into a technical recession before staging a recovery from the second quarter.

After gross domestic product shrank by 0.7 per cent in the last quarter of 2021, “overall economic output could again sink noticeably in the first quarter of 2022, before picking up speed again in the spring,” the German central bank said in its monthly economic report.

After GDP shrank by 0.7% in the last quarter of 2021, “overall economic output could again sink noticeably in the first quarter of 2022, before picking up speed again in the spring”- German central bank

Pandemic restrictions were mostly to blame for the drop, the Bundesbank said, with measures “hitting some service-sector branches hard”.

Manufacturing, meanwhile, continued to report “serious” problems with a lack of raw materials and components, as well as a shortage of labour. “The pick-up in industrial production, however, suggested a certain easing” in the supply situation at the end of 2021, the central bank said.

A recession is technically defined as two consecutive quarters of economic contraction. 

Germany’s European neighbours have seen their economies recover more strongly from the initial impact of the pandemic.

Germany registered 2.8 per cent growth in 2021, while France surged ahead with growth of seven per cent.

The spread of the Omicron variant in Germany led to a record number of infections at the start of the year. 

The government has said it will start to roll back health restrictions as the cases begin to ebb, with most rules lifted by the end of March under the plan.