A global recession is a prolonged period of slow economic growth that affects many countries at the same time. It can cause economies to shrink and unemployment to rise. People may spend less money, which can lead to companies having fewer customers and cutting jobs. Inflation may also increase, which can mean that people can’t afford to buy the things they want because they cost more. This can make it harder for new graduates to find jobs or for homeowners to get a mortgage.
Global recessions often start in one country and spread to others through trade and investment links. This process is called contagion. The recent global crisis, which started in the US, led to a sharp increase in unemployment and substantial declines in output, consumption and investment.
While global economic growth isn’t expected to slow to the level of a global recession, world GDP is likely to grow slower this year than last, according to UNCTAD. This is due to the impact of the ongoing trade and policy uncertainty that has slashed business and investor confidence around the world.
The global economy is so interconnected that the shock caused by a slowdown in one country can have a profound effect on others, especially in developed and emerging economies with close trade and investment linkages. The latest slowdown began in the US and quickly spread across Europe, a result of a collapse in housing market activity. It was exacerbated by the loss of value in financial assets, particularly those linked to the mortgage sector. This, combined with weak consumer demand, triggered a wave of layoffs and precipitated a sharp drop in investment.
