Trump Affecting The World Economy? Italian, German Growth Lower Than Expected Amid Political Uncertainties

Economic growth in Germany and Italy was significantly lower at the end of 2016 than forecasts predicted after a year in which the continent witnessed rising populism, Brexit and terrorist attacks that killed more than 100 people.

Germany’s gross domestic product, which was the largest in Europe, rose a seasonally adjusted 0.4 percent though 2016’s fourth-quarter. Italy’s GDP, which was the third largest in the EU, grew 0.2 percent, Bloomberg reported Tuesday. Both of the countries' GDP statistics fell short of predictions by 0.1 percentage point, Bloombert said.

While the struggles of the Italian economy in 2016 dragged down the overall growth among the 19 nations in the EU, the success of the German economy raised the continent’s combined GDP after it posted an annual growth rate of 1.9 percent at the end of the year.

European economies are quietly recovering from the 2009 recession because of a weaker euro, cheaper oil prices and various stimulus packages provided by the European Central Bank.

While these factors have led to increased consumer spending and European exports in the last few years, economists fear rising inflation and volatile elections in countries like Italy in 2017 could result in another recession. Former Italian Prime Minister Matteo Renzi stepped down in December 2016 after losing a referendum on constitutional reform that would have led to an exit from the European Union. He was replaced by former Foreign Minister Paolo Gentiloni, but members of opposing political parties want an election in early 2017, which could have a negative effect on the European economy.

The election of U.S. President Donald Trump eventually could result in a stronger euro as certain European political parties look to campaign on similar protectionist trade policies that scapegoat countries like Germany for benefiting from the weak currency. Trump has talked about implementing a border tax in the U.S., citing how countries like Germany imposing such taxes on American goods, making them more expensive and less competitive.

The unemployment rate in Germany is the lowest it has been since reunification in 1990. The German GDP in the fourth quarter of 2016 was driven by increased domestic demand as both government spending and household consumption rose. Many economists have expressed concern about the long-term health of the German economy as its open door policies on immigration have cost the government billions of dollars.

“The data are all right — German growth is solid, and impulses came exactly from where we expected them to,” Marco Wagner, an economist at Commerzbank AG in Frankfurt, told Bloomberg. “Growth drivers will be similar in 2017.”

The countries that make up the European Union represent the second largest economy in the world. The combined per capita GDP among all EU countries in 2015, which is the GDP divided by the population, was $37,800 compared to $57,084 in the United States and $14,340 in China.