Germany’s economy shrank 1% in the final three months of last year as the latest coronavirus restrictions and supply chain bottlenecks kept output below pre-pandemic levels.

Europe’s largest economy grew 2.7% last year, although output in the fourth quarter fell 0.5% to 1% from the previous quarter, preliminary estimates from the Federal Statistics Office showed on Friday.

The figures mark a rebound from 2020, when Germany’s gross domestic product shrank by 4.6% in a record post-war recession caused by the Covid-19 crisis. But the country lags other large economies, including the United States, France and the United Kingdom, whose output has rebounded above pre-pandemic levels.

Georg Thiel, president of Germany’s statistics office Destatis, said the country’s GDP was still 2 percent below its pre-pandemic level. “Despite the ongoing outbreak and mounting supply and material bottlenecks, the German economy has been able to recover after last year’s downturn, although economic output has not yet reached pre-crisis levels.”

Germany’s sprawling manufacturing sector has been hampered for months by supply chain delays and shortages of materials such as semiconductors. Its larger services sector has also been hampered by new restrictions to stem a record surge in coronavirus infections.

“The final quarter of 2021 is likely to be weak given the necessary restrictions on access to intensive services and production difficulties in manufacturing due to ongoing supply bottlenecks,” the German finance ministry said in a statement.

Economists expect the German economy to rebound strongly later this year once coronavirus restrictions are lifted and supply bottlenecks are eased. But they fear that if the problems persist, the country could slip into a recession — defined as two consecutive quarters of declines in GDP.

Carsten Brzeski, head of macro research at ING, said: “The annual figures mask a contraction in the economy in the final quarter of 2021, underscoring the high risk of a full recession by the end of the year.”

This Bundesbank Germany’s growth forecast was downgraded last month, but it said it still expected the economy to rebound above pre-pandemic GDP levels in the coming months, with growth of 4.2% in 2022, helped by a “private consumption boom” and higher growth. Exports and business investment.

“From early summer, we expect the economy to recover strongly again as the seasonality of the Covid-19 outbreak subsides,” said Jörg Krämer, chief economist at Commerzbank. “This is also supported by the fact that manufacturing orders are more abundant than at any time since statistics began in the early 1960s.”

Destatis said last year the country’s manufacturing output was still 6% below 2019 levels, while the sports, culture and entertainment sector had a shortfall of 9.9%.

That was partly offset by a public sector rebound fueled by higher government spending, as the country’s budget deficit edged up to 153.9 billion euros last year, the second-highest since the country was unified more than 30 years ago.