BERLIN (Reuters – Germany’s inflation rate will fall noticeably when one-off effects cease, according to the Economy Ministry on Monday.

The current inflation rate is 4.5%, the highest level since 1993, due to a base effect from the reduction in value-added taxes last year, which was part of COVID-19 relief measures. The impact of the cut in value-added tax last year, part of government’s COVID-19 relief measures, has led to a sharp increase in raw material prices and an increase in energy prices.

The sentiment of central banks was also questioned. Deutsche Bank (DE) CEO Christian Sewing stated that this situation needed swift countermeasures.

The ministry stated that supply bottlenecks are becoming more established, which means industrial activity will likely remain low in the next year, despite an increase in orders.

The ministry stated that this applies especially to the automotive industry which has been suffering from shortages of semiconductors.

According to the ministry, service providers have seen a positive change in recent years due to the removal of coronavirus protections. These should be able compensate for any weaknesses found within the industrial sector.

It stated that Germany’s Gross Domestic Product should rise only marginally in the last quarter of this year.

Recent cuts in economic growth projections for Germany’s economy have been made by the German government. They now expect it to be 2.6%, instead of 3.5%. This figure will rise 4.1% in the next year, as opposed to the 3.6% predicted for April.