Germany, France, Japan out of recession

euro In the last few days, three of the five largest economies in the world announced that they are no longer in a recession. These are Germany, France, and Japan. Of the other two, the United States is still in a recession, and China didn’t go into a recession.

So what is a recession, and how do countries go into and come out of one?! The most common definition of a recession is when a country’s GDP (Gross Domestic Product) decreases over a six month period. 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 in a year.

yenWhen people spend more money, companies earn more, because of which they can make more products and can employ more people and give higher salaries. As a result, even more people can now spend more money on more things. But the reverse can happen too – if a company doesn’t sell enough, then people don’t earn as much money, and so they buy less, and companies make even less money. If this happens long enough, a country can go into a recession. These days, things are even more complicated because we buy products from other countries as well. So, for example, if Japan is in a recession, the Japanese buy less American products, and that starts hurting the US economy.

The global economy crashed near the end of 2007, and many countries have gone into a recession since then. Governments of many countries have tried to help their own economies by giving their citizens tax breaks, helping people who have lost jobs, making it easier for people to get loans, helping companies that are in trouble, and giving incentives to people to buy things.  This has helped some countries improve their economies. Germany and France announced that their GDPs grew by 0.3%, and Japan’s GDP grew by 0.9%. They are no longer officially in a recession. So for the moment, there is hope that the global economy is slowly recovering.