Global recession

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A global recession is a period of global economic slowdown. The International Monetary Fund (IMF) takes many factors into account when defining a global recession, but it states that global economic growth of 3 percent or less is "equivalent to a global recession".^[1][2] By this measure, three periods since 1985 qualify: 1990-1993, 1998 and 2001-2002.^[3][4]

Contents 1 Overview 2 Possibility of a global recession in 2009 3 See also 4 References 5 External links

[edit] Overview

Informally, a national recession is a period of declining productivity. In a 1974 New York Times article, Julius Shiskin suggested several rules of thumb to identify a recession, which included two successive quarterly declines in gross domestic product (GDP), a measure of the nation's output.^[5] This two-quarter metric is now a commonly held definition of a recession. In the United States, the National 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 other than USA, the two-quarter rule is also used for identifying a recession.^[6]

Whereas a national recession is identified by two quarters of decline, defining a global recession is more difficult, because developing nations are expected to have a higher GDP growth than developed nations.^[7] According to 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 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. Countries in East Asia (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.^[7]

The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 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.^[3]

[edit] Possibility of a global recession in 2009

According to the IMF’s World Economic Outlook, October 8, 2008, the world economy is “entering a major downturn” in the face of “the most dangerous shock” to rich-country financial markets since the 1930s. IMF expects global growth (measured using purchasing-power parity), to come down to 3% in 2009, on the verge of what it considers to be a global recession.^[1]

The World Bank said in December 2008 that the global economy will enter a recession for the first time since 1982. International trade will decline from 2007 levels.^[8] The bank said it expects global GDP growth to decline to 0.9% in 2009 from 2.5% in 2008. Any global growth rate under 2.0% is tantamount to a recession according to economist David H. Wang. Global trade is expected to decline 2.1% in 2009, the first decline since 1982, on reduced global demand and export credits.

• Germany, Europe's largest economy, contracted by 0.5 percent in the third quarter of 2008, putting it in recession for the first time in five years.^[9]
• Japan's GDP contracted at an annual rate of 0.4 percent from July to September 2008, marking the second consecutive quarter of negative growth. Japan's previous recession was in 2001, after the dot-com bubble burst in the United States.^[10]

• The Eurozone economy. made up of the 15 countries that use the euro contracted by 0.2% in the third quarter of 2008 following a 0.2% fall in GDP in the second quarter.^[11]

• In USA, GDP dropped 0.5% drop in the third quarter of 2008. A number of economists surveyed by Wall Street Journal expect gross domestic product to decline at an annualized rate of 3% in this year's fourth quarter and 1.5% in the following quarter.^[12]

Despite the global economic forecast for 2009, the annual growth in greenhouse gas emissions of 3% is only likely to slow modestly. It may even rise over the long term because of the downturn's impact on global climate talks and the funding of renewable energy projects.^[13]

Jan 2009: The IMF updated their forecast of global GDP growth in 2009 from over to 2% down to 0.5%.^[4]

[edit] See also

• Financial crisis of 2007-2009
• Late-2000s recession
• 2000s energy crisis
• 2007–2008 world food price crisis

[edit] References

[edit] External links

• The Thirty-Five Most Tumultuous Years in Monetary History: Shocks and Financial Trauma, by Robert Aliber. Presented at the IMF
• Business Cycle Expansions and Contractions The National Bureau Of Economic Research
• Independent Analysis of Business Cycle Conditions - American Institute for Economic Research (AIER)