International Monitory Fund chief Ms Kristalina Georgieva has announced that world economy have entered into a global recession worse than 2009. IMF have reassessed the prospects for growth for year 2020 and 2021. It is now clear that we have entered a recession as bad our past global recession which lasted from 2009 to 2010.
Global Economic Recession 2020
Global Recession confirmation came after the discussion with all 189 member country representatives virtually. Corona Virus has multiplied the speed of negative global growth for year 2020. More than 150 countries across the world are facing severe existential threat due to COVID-19 Pandemic and going though lock down.
What triggered Global Recession
Recession is a very common phenomenon of any business cycle. Every 8 to 10 years this process of recession happens and recover automatically. Global economic recession 2020 was expected we all countries were trying their best to overcome the declining trade and economic activities. Corona Virus Pandemic has been called as a trigger for the recession 2020. USA accused China for not letting the world know about the corona pandemic from the beginning besides china tried to cover it up for some time. When this situation got out of China’s hands, they issued an advisory for other nations which was already too late for the counties to act and contain this pandemic. If we want to summarized all this in a line we can say that China caused global economic recession 2020
Duration for Recession 2020
We all were fearing a global recession which was standing on our doors since past 6 months but corona pandemic has increased its effect manifolds by halting all economic activities in more than 150 countries. We do expect it to be quite deep and expecting affected countries to step up containment measures aggressively so we can shorten the duration of global recession when the economy is in standstill,
IMF has accessed World Economy on 8 Major recession Indicator and has done a deep fiscal impact analysis of these indicator on global economy. Announcing Recession based on personal experience and analysis of any individual does not hold any ground. Below if the list of recession indicator IMF usage to analyse global economy.
- Net Lending/ borrowing
- Primary Net Lending
- Cyclical adjusted balance
- Cyclical adjusted primary balance
- Gross debt position
- Net Deb
IMF Compile data in all above mentioned 8 indicator for each world economy and analyse the effect of each indicator to other countries as well. Please visit IMF for detailed information of the recession indicator data.
Effects of recession
A major concern about the recession is a long-lasting impact of the sudden stop of the world economy is the risk of a wave of bankruptcies and layoffs that not only can undermine the recovery but erode the fabric of our societies. The major effects of any global recession can be seen with following points
- Decreased trade and production of goods
- Declined GDP
- Increased Inflation
- Limited spending on social development and health schemes
Which countries will be most affected
IMF Chief has issued a statement stating that USA is already undergoing a recession as is the rest of the advanced economies of the world. Emerging and developing countries which is not yet affected with Corona virus pandemic will also have severe effects on economic development prospects for 2020. IMF is still accessing the overall impact of this global recession which is going to hit hard specially to the countries with high population.
What the Way Out of Recession
There is no clear cut guidelines or road map to come out of recession. Large scale economical reforms and government policies to boost SME trade and private investments is crucial for fast revival of any economy. Economic diversification is most important for fast economic recovery.Instead of depending on a major GDP contributing sector government should focus on multiple sources of GDP and work upon the development of new GDP contributing sectors.
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