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What is Recession?
A recession is when the GDP growth rate of a country is negative for two consecutive quarters or more. But a recession can be gauged even before the quarterly gross domestic product reports are out based on key economic indicators like manufacturing data, decline in incomes, employment levels etc.,
Although an economy can show signs of weakening months before a recession begins, the process of determining whether a country is in a true recession (or not) often takes time. A recession is short, but its impact can be long-lasting.
Why do recession occur?
Understanding the sources of recessions has been one of the enduring areas of research in economics. There are a variety of reasons recessions occur. Some are associated with sharp changes in the prices, which lead to steep drop in spending by both the private and public sectors.
Some recessions, like the 2008 global financial meltdown, are rooted in financial market problems. Sharp increases in asset prices and a rapid expansion of credit often coincide with accumulation of debt. As corporations and households get over-extended and face difficulties in meeting their debt obligations, they reduce investment and consumption, which in turn leads to a decrease in economic activity. Not all such credit booms end up in recessions, but when they do, these recessions are often more costly than others. In some countries with strong export sectors, recessions can be the result of a decline in external demand. Adverse effects of recessions in large countries—such as Germany, Japan, and the United States—are rapidly felt by their regional trading partners, especially during globally synchronized recessions.
Some recessions are also a result of global shocks like the current coronavirus-triggered lockdowns, which shut down economic activity in many countries.
Impact of a recession
One of the consequences of recession is unemployment, which tends to increase, especially among the low-skilled workers, due to companies and even government agencies laying off staff as a way of curtailing expenses. Another result of recession is drop in output and business closures. Fall in output tends to last until weaker companies are driven out of the market, then output picks up again among the surviving firms. With more people out of work, and families increasingly unable to make ends meet, there will be demands for increased government-funded social schemes. With drop in government revenues during recession, it becomes difficult to meet the increased demands on the social sector.
The most popular, or most recommended, policy for any country to dig itself out of recession is expansionary fiscal policy, or fiscal stimulus. This can be usually a two-pronged approach – tax sops and increased government spending.
Latest Updates on Recession
At World economic 2022 in Davos, business, political, and tech leaders are clear that deeper collaboration is essential to rebuild a world damaged by the Covid-19 pandemic and geo-political aggression
"We are not in a recession yet, but the signs are not good," said David Rubenstein, Co-Founder and Co-Chairman of Carlyle at the World Economic Forum's (WEF) Annual Meet on Tuesday
Oil prices fell on Tuesday as concerns over a possible recession and China's Covid-19 curbs outweighed an expectation of tight global supply
The pound fell by more than a cent against the US dollar to hit its lowest level since mid-2020
India may have done well by keeping commercial bank lending to the government within manageable limits, but RBI has been lending more to the government, which means it has been printing more notes
BofA reported fund managers were the most bearish they'd ever been about the outlook for growth and JPMorgan Chase & Co. boosted its reserves to insulate itself against an economic deterioration
Global growth optimism, according to the survey findings, was at an all-time low, with recession fears surging in the world's investment community.
Europe's largest economy is heavily dependent upon Russia for energy, and nations banks echoed concerns over possible energy disruption expressed by big names in industry in recent days
MSCI's global share index fell 0.17% to 710.22, against a high of 724.49 hit on Wednesday, heading for little change on the week.
The current yield inversion has more to do with the temporary demand-supply mismatch in the bond market and doesn't necessarily signal a recession in the US
Sri Lanka's economy grew at a slower-than-expected 1.8% in the 4th quarter of the 2021 financial year, taking its full year growth to 3.7 per cent, data from the govt's statistics department showed
The Fed kicked off a new tightening cycle by raising the benchmark interest rate by 25 bps to a range of 0.25 to 0.5 per cent on March 16
While immediate implications are likely lower growth, higher inflation and disruptions to financial markets, the longer-term implications are disruptions to global supply chains, he said
Output in Germany fell by between 0.5% and 1% in the fourth quarter, the state statistics agency Destatis said Friday.
Contingency is a negative event which may occur in future, like recession or pandemic. The Constitution has a provision for a contingency fund. Its corpus is always kept intact. Find out how it works
The potential for global recession could be worse than the 2008 GFC : Report
Barclays argues the market environment isn't similar to what happened during the collapse of Lehman Brothers
The US budget deficit hit $2.54 trillion for the first 10 months of this budget year, fed by spending to support the country after the pandemic-induced recession
Leading FMCG companies in the country are expecting their sales growth numbers in high double digit in the April-June quarter