What is a Global Recession?
A global recession is an extended period of economic decline around the world. Global recessions are typically more synchronized than typical national business cycles, as trade relations and international financial systems transmit economic shocks between countries. Global recessions can also result from a decrease in global demand, especially for goods and services produced by export-oriented economies.
The International Monetary Fund (IMF) uses a number of criteria to identify global recessions. Among them, it takes into account the drop in per capita gross domestic product worldwide. A global recession must also occur at the same time as a significant weakening of other macroeconomic indicators, such as employment and investments.
Global recessions can also be triggered by sharp increases in global uncertainty, which lead consumers and businesses to reduce their spending and investment. This increase in uncertainty may be caused by events such as political turmoil, financial crisis, or natural disasters.
When economies slow down, the first signs tend to show up on stock markets. When stock prices fall significantly, it is often seen as a warning sign that the economy is on the verge of a recession. However, it is important to remember that falling stock market values do not always mean that a recession is imminent. The reason for this is that the fall in share prices does not necessarily reflect a fundamental reappraisal of future profits by investors and companies. Rather, it usually indicates that some investors have become worried about the risks associated with a recession.
