Recession across the globe

recessionOn Sept 25, Ireland announced that its economy is in recession. On Nov 13, Germany announced that its economy is in recession. On Nov 14, Italy announced that its economy is in recession. On Nov 17, Japan announced that its economy is in recession. Ok, you get the idea. So what’s a recession and why are so many countries going into one?

The most accepted definition of a recession is when a country’s gross domestic product (GDP) decreases over a period of 6 months. The GDP of a country is the total value of all the products and services that are produced by the companies and the people of that country.

When you get a haircut, you are using somebody’s services. When you buy a bike, you are consuming a product. The more people spend, the more money companies make. If companies make more money, they can give their employees more salaries, and they can start creating more products which creates more jobs for people. If more people have jobs or better salaries, the more money they will spend to buy things. But the reverse can also happen. If a company isn’t selling enough, it would have to fire people or reduce salaries. These people will buy less because of which companies will make even less money. So things can keep getting worse, and if that happens for long enough, the country can go into a recession.

These days, things are even more complicated because we buy products from other countries as well. So if Japan has a recession, and they stop buying a lot of products from the United States, it starts having an effect on the economy of the United States as well.

Countries around the world have gone through recessions over time. And historically, they do recover, though it can take some time. Governments usually try to help. They can give their citizens some tax breaks, so people have more money to spend. They can give some money to people who have lost their jobs. They can make it easier for companies to get loans and create more products and jobs. We will be seeing a lot of this across the world in the coming weeks and months.