Global recession – definition and meaning

A Global Recession is a recession that stretches across the world. It is a period of global economic decline. According to the IMF, the macroeconomic indicators that point to a global recession include declining oil consumption, capital flows, trade, industrial production, and rising unemployment. In other words, a drop in global output should coincide with a weakening in those indicators for there to be a global recession.

If we use the IMF’s definition, there have been four global recessions since the Second World War. They started in 1975, 1982, 1991, and 2008. IMF stands for the International Monetary Fund.

The 2007/8 global recession was the widest, deepest, and longest-lasting of all (since World War II). It lasted until 2011/12. We call it ‘The Great Recession.’ The world economy has since been recovering. However, the recovery has been a slow and fragile one.

What is a recession?

A recession affects just one country or region. We define a recession is a period of economic contraction that lasts at least two consecutive quarters. Depressions last at least three years and reduce GDP by at least 10%.

Regarding a global recession, however, the IMF does not specify two quarters of GDP per capita contraction. In fact, it does not specify any period.

According to Wikipedia:

“A global recession is recession that affects many countries around the world—that is, a period of global economic slowdown or declining economic output.”

Global recession - definition and illustration
For one country to be in a recession, there must have been two consecutive quarters of GDP contraction. The IMF does not have a time stipulation for a global recession.

The 2007-2012 global recession

Most people refer to it as The Great Recession. It lasted from 2007 to 2012. It was a period of general economic decline in world markets.

Not all countries agree on the Great Recession’s length. The US National Bureau of Economic Research says it lasted from December 2007 to June 2009.

Although it affected many countries across the world, some suffered more than others.

According to the IMF, it was the worst global recession since The Great Depression. The Great Depression, which originated in the United States, spread internationally during the 1930s.

  • Causes

The causes of the Great Recession mainly originated in America, particularly in the real estate market. However, economists say that choices that other countries made also contributed. It was related to the 2007/8 financial crisis and the 2007-2009 subprime mortgage crisis.

There was a collapse of banks in the world economy and scarcity of valuable assets in the market economy.

There were many bailouts of banks in the United States and Europe during the Great Recession. In other words, the taxpayer had to save failing banks with funds.

According to the IMF, a global recession typically occurs over a cycle that lasts from eight to ten years. During three global recession that occurred after WWII, global GDP per capita growth was either zero or negative.

GDP per capita is the total GDP of an area, region, or the world, divided by its population. Per capita means per head. GDP stands for Gross Domestic Product.

Post-recession, strategic economic policies aimed at stimulating growth, such as adjusting interest rates and increasing government spending, are critical to catalyze recovery and stabilize global markets.

“Recession” vocabulary and concepts

The term “global recession” is a compound phrase. Compound phrases consist of two or more words. Let’s look at some more recession-related compound phrases, their meanings, and how they are used in a sentence:

  • Technical Recession

Two consecutive quarters of decline in GDP.
Example: “After the second quarter of shrinking GDP, analysts declared a technical recession.”

  • Mild Recession

A period of economic downturn that is less severe.
Example: “The central bank’s swift action helped to ensure that the economy only experienced a mild recession.”

  • Double-Dip Recession

A recession followed by a short-lived recovery, then another recession.
Example: “Investors are wary of a double-dip recession due to the volatility of the market.”

  • Recession Proof

Resistant to the effects of an economic recession.
Example: “Their focus on essential goods has made the company relatively recession proof.”

  • Post-Recession

The period following a recession.
Example: “Post-recession analysis showed a significant shift in consumer spending habits.”

  • Anti-recession

Measures or actions taken to prevent or mitigate a recession.
Example: “The government’s anti-recession package aimed to boost consumer spending and job creation.”

Video – What is a Global Recession?

This educational video, from our sister channel on YouTube – Marketing Business Network, explains what a ‘Global Recession’ is using simple and easy-to-understand language and examples.