A global recession is a sharp economic slowdown that affects many countries simultaneously. It can last for several months and cause a deterioration in the economy in terms of lower growth, rising inflation, or higher unemployment. It can be more severe than a national recession because economies that trade with one another are interlinked, and recessions in major trading partners can quickly impact each other.
Historically, global recessions have tended to be followed by global recovery episodes. For example, the global recession of 1975 was triggered by the oil shock of that year, which drove oil prices skyrocketing and led to high inflation. A global recession that followed almost a decade later in 1982 was caused by a combination of factors, including a tightening of monetary policies in advanced economies and a debt crisis in Latin America.
The most recent global recession was the Great Recession, which began in late 2007, after housing investment peaked and financial markets were stressed. From peak to trough, US GDP fell by 4.3%, the most since World War II. The decline in economic activity was exacerbated by rising interest rates, which reduced consumer spending and increased business borrowing.
While most economists are not expecting a global recession, there is growing concern over risks. A slowdown in China, for example, could stall global economic growth and hurt emerging markets. A recession also increases the risk of higher interest rates in developed economies, which could make it harder for low-income countries to finance their growth. According to the McKinsey Global Survey 2024, executives expect political transitions and geopolitical instability to have the biggest effect on global economic conditions in the near term.