A global recession is a period of contraction in the world economy. It can be defined in many different ways, but one common definition is that it is a widespread decrease in economic activity. The decline in activity usually lasts for a few months and is visible in production, employment, real income, and other indicators. A global downturn is also often accompanied by a slowdown in international trade, a decrease in foreign investment, and higher borrowing costs for companies and consumers.
It can be difficult to identify when a global recession is coming, as there are no internationally agreed-upon criteria for a recession. The National Bureau of Economic Research defines a recession as a sharp decline in output, spending, and employment that lasts for more than a few months. The World Bank uses a more open definition, relying on a variety of factors to determine when the world economy is contracting.
There have been few global recessions in history, and the most recent – the Great Recession of 2008-2009 — was the deepest and longest since the 1930s. However, there are some warning signs that a global recession is imminent. These include a bloodbath on stock markets and declining copper and oil prices, which are considered barometers of the state of the world economy.
These market turbulences are caused by a combination of underlying economic problems, such as a debt bubble and over-extended credit lines. Once these underlying imbalances are revealed, they can quickly lead to economic instability and recession. Inflation or deflation can then be triggered, with oversupply of goods and services leading to inflation and insufficient demand causing falling prices.