A Global recession is a significant decline in economic activity spread across the economy, lasting for several months and reflected by declining production, employment and real income. It usually coincides with drops in trade and a fall in stocks.
In the last few decades, major economies have experienced a number of global recessions. These “globally synchronized” recessions are typically preceded by periods of rising financial uncertainty, as investors move to protect their assets. During such times, stock markets in developed countries tend to drop and banks are less willing to lend money to businesses and consumers. This can lead to a number of negative outcomes, including high unemployment, foreclosures, and business failures.
Recessions tend to result in reduced consumer spending and investment, which, in turn, leads to decreased production and, ultimately, lower GDP. They are accompanied by a rise in unemployment, often in the form of mass layoffs. Unemployment and production declines typically overlap with a decrease in international trade as exports and, especially, imports drop sharply. In addition, house and equity prices decline. Inflation tends to jump, which can make it more difficult for companies to pay their bills and employees.
While economic growth has recovered from the Great Recession, increased economic policy uncertainty could trigger a global recession. Many executives believe that trade policy changes and geopolitical instability are the biggest threats to economic growth. The United Nations Conference on Trade and Development (UNCTAD) expects global growth to slow this year to 2.3% as escalating trade tensions and rising uncertainty erode investor and business confidence.