A global recession is
recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
that affects many countries around the world—that is, a period of global economic slowdown or declining economic output.
Definitions
The
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster gl ...
defines a global recession as "a decline in annual percapita real World GDP (
purchasing power parity
Purchasing power parity (PPP) is the measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a baske ...
weighted), backed up by a decline or worsening for one or more of the seven other global macroeconomic indicators: Industrial production, trade, capital flows, oil consumption, unemployment rate, percapita investment, and percapita consumption".
According to this definition, since
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
there were only four global recessions (in 1975, 1982, 1991 and 2009), all of them only lasting a year (although the 1991 recession would have lasted until 1993 if the IMF had used normal exchange rate weighted percapita real World GDP rather than the
purchasing power parity
Purchasing power parity (PPP) is the measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a baske ...
weighted percapita real World GDP).
The 2009 global recession, also known as the
Great Recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
, was by far the worst of the four postwar recessions, both in terms of the number of countries affected and the decline in real World GDP per capita.
Before April 2009, the IMF argued that a global annual
real GDP growth rate of 3.0 percent or less was "equivalent to a global recession".
By this measure, there were six global recessions since 1970: 1974–75,
[http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm IMF Jan 2009 update] 1984–85,
1990–93,
1996,
2008–09,
and 2018–19.
Overview
Informally, a national
recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
is a period of declining economic output. In a 1974 ''
New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' article,
Julius Shiskin
The gens Julia (''gēns Iūlia'', ) was one of the most prominent patrician families in ancient Rome. Members of the gens attained the highest dignities of the state in the earliest times of the Republic. The first of the family to obtain the ...
suggested several
rules of thumb to identify a recession, which included two successive quarterly declines in
gross domestic product
Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
(GDP), a measure of the nation's output. This two-quarter metric is now a commonly held definition of a recession. In the United States, the
National Bureau of Economic Research
The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic c ...
(NBER) is regarded as the authority which identifies a recession and which takes into account several measures in addition to GDP growth before making an assessment. In many developed nations (but not the United States), the two-quarter rule is also used for identifying a recession.
Japan's Economy Shrinks 0.4%, Confirming Recession
By Jason Clenfield
Whereas a national recession is identified by two quarters of decline, defining a global recession is more difficult, because a Developing country is expected to have a higher GDP growth than a Developed country
A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastru ...
. According to the IMF, the real GDP growth of the emerging and developing countries is on an uptrend and that of advanced economies is on a downtrend since the late 1980s. The world growth is projected to slow from 5% in 2007 to 3.75% in 2008 and to just over 2% in 2009. Downward revisions in GDP growth vary across regions. Among the most affected are commodity exporters, and countries with acute external financing and liquidity problems. If a global recession were to occur in its full magnitude, an estimated 100 million jobs would be lost around the world, with total lost capital hovering at US$120 trillion. Countries in East Asia
East Asia is the eastern region of Asia, which is defined in both geographical and ethno-cultural terms. The modern states of East Asia include China, Japan, Mongolia, North Korea, South Korea, and Taiwan. China, North Korea, South Korea ...
(including China) have suffered smaller declines because their financial situations are more robust. They have benefited from falling commodity prices and they have initiated a shift toward macroeconomic policy easing.
The IMF estimates that global recessions occur over a cycle lasting between eight and ten years. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative.
See also
* 2000s energy crisis
*2007–2008 world food price crisis
World food prices increased dramatically in 2007 and the first and second quarter of 2008, creating a global crisis and causing political and economic instability and social unrest in both poor and developed nations. Although the media spo ...
*Financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of ...
*Great Recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
* Great Depression
*COVID-19 recession
The COVID-19 recession, also referred to as the Great Lockdown, is a global economic recession caused by the COVID-19 pandemic. The recession began in most countries in February 2020.
After a year of global economic slowdown that saw stagnati ...
References
External links
The Thirty-Five Most Tumultuous Years in Monetary History
Shocks and Financial Trauma, by Robert Aliber. Presented at the IMF
The National Bureau Of Economic Research
Independent Analysis of Business Cycle Conditions
- American Institute for Economic Research (AIER)
{{United States – Commonwealth of Nations recessions
Recessions
Market trends
World economy