Can we still talk about recession or is

CAN WE STILL TALK ABOUT RECESSION OR IS IT OVER?

It is crucial that we first explain what recession is before we venture into whether there’s still recession or it’s over already. According to Wikipedia, a recession is defined in economics as “a business cycle contraction when there is a general decline in economic activity.” Recession often leads to losses of jobs, hence, reducing income in the country. With a reduced income comes reduced spending, reduced tax payments, and so on. Therefore, when a recession struck, there’s usually a reduction in money circulation, and the country’s economic activities will be badly affected.

The world’s economy just received a big punch from the unexpected global pandemic, and it is yet to be healed of it. Businesses and economic activities across the world were closed to curtail the pandemic. Thus, government revenue was reduced, yet, government spending increased to find suitable medication and vaccines to cure and control the virus. At a time like this, should we be looking at a new recession, or we shouldn’t be bothered about it?

In April this year, a Household Pulse Survey was launched by the United States Census Bureau to see how the nation is affected by the economic crisis. There were weekly reports provided during this survey. In the end, the result was analyzed. It was discovered that millions of people have lost their job and can’t afford to get quality meals or pay their rent.

The truth is, this is not the time to look away. The world might be looking at a big recession coming their way since a cure is yet to be discovered for the virus.

World’s Bank analyzed and forecasted that the world might witness an economy shrink of 5.2% in 2020 — this year. Should that forecast be proved to be right, then the world might slip into a significant economic recession — one that has never been witnessed after World War II. This report was revealed in the world Bank’s 2020 Global Economic Prospects.

The report further explained that the recession would not only hit the Emerging market and developing economies (EMDEs), but advanced economies will also be significantly affected. The big economies will receive the biggest punch. Their economies were forecasted to shrink by 7% this year. On the other hand, it was predicted that EMDEs economies would decline by 3.6%. With such an occurrence, millions of people will be thrown into abject poverty.

All these are primarily due to the effect of the lockdown. Therefore, the countries that will suffer most will be those that received the hardest punch from the pandemic. Countries like the United States, Russia, and Co, where the virus affected millions of people and killed thousands will be primarily affected and might slip into recession. For instance, economic activities in the United States halted for months, with about 250,000 people killed. The United States today is yet to curtail the rampaging pandemic, and if it continues like that, the country may be looking at a great recession.

Countries that depended mainly on tourism, global trade, external financing, and commodity exports will be significantly affected.

Most developing countries — such as the African countries, suffered less from the virus, and economic activities are gradually returning to normal across their streets. Thus, they ought to manage the supposed recession. However, they also might fail in this regard. This is because most Emerging market and developing economies (EMDEs) depended on external financing and commodity exports. Therefore, their vulnerabilities will be due to external shocks.

Both developed and emerging economies have a massive task at hand if they must avoid the supposed recession.

References

https://www.cbpp.org/research/poverty-andinequality/tracking-the-covid-19-recessions-effectson-food-housing-and https://www.worldbank.org/en/news/pressrelease/2020/06/08/covid-19-to-plunge-globaleconomy-into-worst-recession-since-world-war-ii