A global recession is a prolonged period of economic decline that affects many countries simultaneously. In contrast to individual country recessions that tend to last a few years, a global recession can last much longer, and can be far more severe, because the economies of some nations have close trading links with other nations. Global recessions can also be triggered by events in other countries, such as financial crises or stock market crashes. Because of its size and its importance in international trade, the United States is particularly vulnerable to global economic events. It has experienced several periods of simultaneous, or synchronized, recessions with other advanced economies.
A recession is a time when demand for goods and services declines, leading to lower production, employment and income. A recession can be a short-lived downturn or a long, drawn-out slump, depending on the extent to which demand slows and the responses of governments and businesses.
A slowdown in economic activity typically leads to lower interest rates, which encourage investment and spending but reduce incentives to save. This can lead to deflation or, if central banks react to a recession with additional monetary policy tightening, inflationary pressures. It can also lead to a higher rate of business insolvencies and unemployment. When a recession persists, it can be exacerbated by political events such as a war or pandemic. This can be hard to predict. McKinsey’s latest survey of global economic conditions indicates that executives believe political transitions and geopolitical instability will most affect the global economy in 2024.