A global recession occurs when several countries simultaneously experience economic slowdowns or declines. These economic fluctuations may be attributed to events such as declining investment or consumption, increased unemployment, or falling industrial production. The severity of the contraction may vary from country to country depending on a variety of factors such as economic policies, geopolitical uncertainty, and the degree to which a country is dependent on exports to foreign markets.
During the Great Recession, for example, China and India saw robust growth rates throughout the crisis while Brazil, Russia and South Africa struggled with deep recessions. This was largely due to these countries being less reliant on U.S. financial markets, having large domestic market demand that could sustain their economies and exporting fewer elastic products that are subject to global consumer price declines (as experienced during the COVID-19 pandemic).
The probability of a global recession has recently reached levels not seen since 2008. This increase is primarily a result of the Federal Reserve’s continued efforts to wring inflation from the economy by raising interest rates. This has also pushed the US dollar higher, making it more expensive for consumers and businesses around the world to import goods.
This in turn reduces consumer spending and causes companies to slow capital investments. Dense global supply chains magnify these effects as raw materials and intermediate inputs often cross international borders multiple times before being turned into final products. A disruption in these networks can have ripple effects, causing companies to pause or even shut down.
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