Despite the fact that recessions have become milder over time, the global economy remains vulnerable to another one. The last global recession – the Great Recession of 2007 to 2009 – was one of the longest and deepest economic contractions in history, triggering a severe drop in world trade, investment, and consumption that took years to recover from.
There is no clear-cut definition of a global recession, though two consecutive quarters of falling GDP growth are generally used as a threshold. A recession is considered to be in effect when unemployment rises, and growth slows so dramatically that it can’t be reversed without a sharp drop in output, jobs, and incomes.
The global economy has been slowing down for a while, and the COVID-19 pandemic and wars in Ukraine and the Middle East left their mark on 2023. According to UNCTAD, growth is now expected to slow to 2.3% globally this year — below the average rate that’s been associated with global recessions in the past.
Tu Nguyen, an economist with RSM Canada, says that the looming possibility of a global recession is weighing heavily on business and consumer confidence. She points to the ongoing trade tension between Washington and Beijing as a key factor in her prediction.
If the global economy does slide into a recession, consumers will likely spend less money and businesses will be less willing to hire. That could lead to a higher unemployment rate, as well as price hikes for goods and services, which would make life more expensive for households.