The global economy continues to grapple with slow growth. In fact, two G7 economies dipped into outright recession in the fourth quarter of 2023, and the outlook is grim for the rest of the year.
A recession is an extended period of economic decline that typically lasts for at least six months. Economic declines lead to lower revenues for businesses and governments, reducing their ability to pay employees and make investments. During a recession, many people are unemployed or work fewer hours.
Global recessions are characterized by more or less simultaneous or synchronized contractions in many national economies, as trade relations and international financial systems transmit economic shocks from one country to the next. The 2009 global recession was the worst in nearly 80 years, and it took several years for most nations to recover from its effects.
A global recession could result from contractions in manufacturing, services and other sectors of the economy, which would be amplified by declining demand for commodities such as oil. However, the extent to which a global recession would be severe depends on the specific economic circumstances in each country. For example, the size of a country’s manufacturing sector and its trading relationships with other countries determines how large an impact a contraction in this sector will have on GDP. Similarly, the complexity of a country’s markets and investment efficiency determine how quickly the financial sector can respond to shocks. In addition, demographics determine how much a recession affects the lives of different groups of people.
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