Berlin, Jan 7 (IANS): Germany's annual inflation rate hit 3.1 per cent in 2021, the highest level since 1993, according to preliminary figures published by the Federal Statistical Office (Destatis).

The development was driven by base effects due to low prices in 2020, Xinhua news agency quoted Destatis as saying on Thursday.

The temporary reduction of value added tax (VAT) and the sharp decline in mineral oil product prices last year had an upward effect on the overall inflation rate.

The introduction of CO2 pricing in the transport and housing sectors at the beginning of 2021 further fuelled inflation in Germany, according to Destatis.

In December, inflation climbed to 5.3 per cent, it said.

In particular, energy prices including household energy and motor fuels were up 18.3 per cent year-on-year.

The German Council of Economic Experts (GCEE) expects inflation to decline but still remain at a high level this year, forecasting an annual inflation rate of 2.6 per cent for 2022.

"Longer-lasting supply shortages, higher wage settlements and rising energy prices pose a risk that the temporary factors that are driving up prices may lead to persistently higher inflation rates," the GCEE said.