A global recession is a downturn that affects many nations around the world i.e. a period of economic downturn or declining economic output. The IMF defines recession as a decline in annual per-capital real world GDP (Purchasing power parity weighted) backed up by a decline for one or more of the seven other global macroeconomic indicators: Unemployment rate, per-capital investment, capital flows, oil consumption, industrial production, trade, per capital consumption.
A simpler definition of recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
Here are reasons for a recession in 2022
- High Interest rates
- Stock Market Crash
- Falling Housing Prices and Sales
- Deregulation
- War/Post-War Slowdowns
- Wage-Price Control
- Deflation and Inflation
The US Dollar against major currencies has reached its highest level since two decades. There was parity between the Euro and US Dollar last month for the first time in over two decades. Prices of major currencies have moved against the US Dollar in the past one week. These corrections in the price of currencies against the US Dollar might be temporary. So far in 2022, the US economy has done better than a lot of economies.
The Russian invasion of Ukraine has led to a sharp fall in global markets and caused a sharp increase in the price of energy, food, and other commodities. The economic sanctions imposed on Russia and the retaliation by Russia have limited global trades.
In the next few months, the US Dollar might appreciate further against major currencies, which could eventually slow down the effect of the recession.
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