A global recession is a contraction in economic activity that affects economies around the world. It usually starts when demand for goods and services slows.
The last global recession was triggered by the collapse of the US financial firm Lehman Brothers in September 2008. This and the failure or near-failure of other firms caused investors to panic and withdraw money from financial markets. This led to banks tightening their lending, which made it harder for businesses and individuals to get credit. Consumer spending also slowed as people felt poorer. Stock prices fell and the value of savings in retirement accounts was lost.
During a global downturn, countries try to spur growth by cutting interest rates and pumping money into their economy. This policy-driven stimulus typically helps, but lingering effects can last years after the economy returns to growth.
In the decade since the last global recession, many emerging and developing economies have become more vulnerable to economic shocks. This is because they used up much of the fiscal and monetary policy ammunition that they gained in previous years of strong growth.
Recessions have a profound impact on people’s lives and wellbeing. In the most severe downturns, unemployment can rise to 10% and people’s ability to repay loans suffers. Their living standards decline and their mental health is affected. They might feel more depressed, anxious or guilty for causing or being caught up in the downturn. They may also feel unable to cope with the stress and uncertainty of the situation.