A global recession is a period of broad economic decline affecting many countries simultaneously. Since World War II, theInternational Monetary Fund (IMF) has identified four such recessions, with the 2009 downturn being the most severe.
Recession that affects many countries around the world
Countries by realGDP growth rate (2009)Countries by real GDP growth rate (2014)Number of countries having a banking crisis in each year since 1800. This is based onThis time is different: Eight centuries of financial folly, which covers only 70 countries. The general upward trend might be attributed to many factors. One of these is a gradual increase in the percent of people who receive money for their labor. The dramatic feature of this graph is the virtual absence of banking crises during the period of theBretton Woods agreement, 1945 to 1971. This analysis is similar to Figure 10.1 in Reinhart and Rogoff (2009). For more details see the help file for "bankingCrises" in the Ecdat package available from theComprehensive R Archive Network (CRAN).
The International Monetary Fund defines a global recession as "a decline in annual per‑capita real World GDP (purchasing power parity 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, per‑capita investment, and per‑capita consumption".[1][2]
According to this definition, sinceWorld War II 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 per‑capita real World GDP rather than thepurchasing power parity weighted per‑capita real World GDP).[1][2] The 2009 global recession, also known as theGreat Recession, 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.[1][2]
Before April 2009, the IMF argued that a global annualreal GDP growth rate of 3.0 percent or less was "equivalent to a global recession".[3][4] By this measure, there were six global recessions since 1970: 1974–75,[5] 1984–85,[5] 1990–93,[6] 1996,[6] 2008–09,[6] and 2018–19.[7]
Informally, a nationalrecession is a period of declining economic output. In a 1974New York Times article,Julius Shiskin suggested severalrules of thumb to identify a recession, which included two successive quarterly declines ingross domestic product (GDP), a measure of the nation's output.[8] This two-quarter metric is now a commonly held definition of a recession. In the United States, theNational Bureau of Economic Research (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.[9]
Whereas a national recession is identified by two quarters of decline, defining aglobal recession is more difficult, because adeveloping country is expected to have a higher GDP growth than adeveloped country.[10] 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 andliquidity 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 inEast Asia (includingChina) 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.[10]
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.[6]
.svg)
