Will the world enter to another economic and financial recession ?
What is the concept of economic recession?
Technically, recession is a situation in which economic growth has a downward trend for two seasons of the year, and according to the country's economic structure, it is in a state of stagnation, and the ministries of the countries will look for ways to get out of this state of stagnation.
The business cycle includes 4 stages: Expansion, Peak, Contraction, and Trough. The recession will start from the peak point and will continue until the trough point. The worse form of recession is inflationary stagnation, which continues to increase the general level of prices, making it difficult to get out of recession.
On the contrary, some economists' opinions divide economic states into equilibrium and imbalance, where stagnation is divided into two states. If the economy is in a state of equilibrium, it will change to a state of imbalance and at this stage it will seek correction and balance.
Recession affects the important economic sectors of industry, services and agriculture and makes its growth negative. Economists believe that the imbalance created in the economy will be corrected and enter a new stage of growth. In fact, economic recession is an economic cycle in nature.
Factors that lead the world economy to economic recession.
Recession can have many factors. Economic factors include increasing production costs (raw materials, oil and metals), increasing foreign debt, economic dependence on other countries, economic sanctions, financial stress, rapid changes in economic expectations, etc.
Economic recessions that the world has gone through
As the history of the economy stretches, the people of Britain used bronze as currency for 1000 years until about 800 BC. The value of bronze decreased and the economic crisis spread to other countries.
1929 – The Great Depression began in the United States and spread throughout the world.
The world experienced more than 100 small and relatively large economic recessions during the last 30 years, the most important of which was the 2007-2008 economic crisis that started in America and spread to European countries including Italy, France, Spain, Germany and other countries.
Signs and duration of economic recession
It is possible to find signs of economic recession by changing economic variables. Such as the reduction of the GDP indices and the stock exchange index, the increase in the general level of prices and the increase in the unemployment rate. The period of transition from recession may take months or years.
Warning of economic recession in the world by international institutions
The International Monetary Fund, the World Bank, the International Energy Agency are the organizations that have warned about the global recession. On the other hand, the Fitch credit institution has predicted a deep recession in England and Deutsche Bank, a recession in Germany is inevitable.
The current state of the world and the possibility of economic recession
After the transition period from the beginning of the world's corona virus, in which increasing liquidity was injected into the economy to improve the economic situation, this time the effects of inflation showed in the economy and an important issue has been stuck. The war in Ukraine and the reduction of exports to Europe caused the cost of energy to rise in the European region and exacerbated the increase in the inflation rate.
On the other hand, with the decisions of OPEC+, it decided to reduce production due to the possibility of recession and decrease in demand and to prevent the decrease in oil prices. The continuation of the contractionary policies of the central banks in the countries will lead to the possibility of the supply chain and production costs, as well as an increase in inflation and a decrease in the volume of exchanges.
Macro and micro economic data of advanced and developing countries do not show positive signs of the economic outlook. During the recession period, companies may be at risk of bankruptcy due to the increase in commercial loan rates.
In that case, the financial and monetary policies of the countries will seek a way out of the recession by adjusting according to the economic conditions. But we can look at the euro zone differently.
Because as we have seen in the 2007-2008 crisis, the incompatibility with the unified monetary policy in Europe and with the separate financial policy of the European countries has made it difficult to get out of the crisis.