What is a recession: simply about the complex. What is a recession

In economics, the term "recession" means "slowdown." In simple terms, a recession is when businesses produce less, consumers consume less, demand falls, and the economy as a whole is not doing well, but there is still hope.

The state of the economy is measured by gross domestic product - . The usual thing for an economy is its growth, that is, an increase in GDP.

• China's GDP growth in 2014 was 7.4%;
• USA - ;
• And global GDP grew by 3.2%.

Against this background, Russia did not shine in 2014 (GDP growth was only 0.6%), but there was no need to talk about a crisis then. The year 2015 is a different matter. Financial authorities are recording a full-fledged recession, which at the end of the year could result in a 4% loss of GDP. Simply put, a recession is when the economy (its GDP) goes into negative territory.

Why does it happen?

A recession is a combination of management errors and changes in market conditions. There are several factors for Russia:

• Structural problems (monopolies and low share of medium/small businesses);
• Economy focused on hydrocarbon exports;
• Low oil prices;
• Decrease in budget revenues;
• Fall in demand and production;
• Depreciation of savings;

Unlike the crisis of 2008-2009, the existing recession in the Russian Federation is local, and not “imported from outside” and started long before the introduction, although they, of course, made their contribution.

No longer stagnation, not yet a crisis

Stagnation is the “trampling” of the economy near zero, a crisis is a sharp drop in all economically important indicators. A recession is an intermediate state between stagnation and crisis, which as a result may not lead to a crisis. In other words, if the crisis has already declared “death,” the recession still offers a chance for recovery with a correct diagnosis.

This is scary?

An economic slowdown is usually accompanied by rising prices and unemployment, a decline in production and the well-being of citizens, and, in general, depression. This is the name “recession” had until 1929. Since then, only a long and deep decline in the economy has been called a depression.

The cyclical nature of any economy (rise, peak, slowdown, crisis) implies the inevitability of recessions at certain points in time, even for the strongest economies. A striking example of this is the already mentioned crisis of 2008-2009, when almost all the leading countries of the world suffered, regardless of their economic policy. But in 2015, Russia is not alone either. Negative growth in economic wealth

Today we will look at another economic term and talk about what it is economic recession. After reading this article, you will learn what the concept of “recession” means, what criteria can be used to determine it, what are the main causes and consequences of a recession. I think this will be interesting and useful for everyone to know. So, recession – what is it in simple words.

Economic recession: what is it?

Economic development always occurs in cycles; there is a concept - a repeating period of economic development of a country, consisting of four phases: rise, peak, decline and bottom. So, a recession in simple words is just another, alternative name for the phase of economic decline.

An economic recession is a time period during which there is a decline in the rate of economic development of a state.

However, to be more precise, the macroeconomic term “recession” means a systematic and insignificant slowdown in the rate of economic development. That is, when a country’s economy is falling at a rapid pace, it is simply called a “fall”, “recession,” and when a slow, sluggish process occurs, the term “recession” is more often used.

The term “recession” comes from the Latin recessus, which means “retreat.”

A period of economic recession is usually a long process. It lasts at least six months to a year, but more often – several years.

Due to the cyclical nature of economic processes, recessions in the economy are inevitable: they are inherent even in the most highly developed countries; it is virtually impossible to avoid a recession.

It is also interesting that the economies of large states are closely interconnected, therefore periods of recessions in different countries often begin one after another, collectively forming a global global wave of recessions - we have already observed and are observing this more than once.

What characterizes a period of economic recession?

How do you determine when an economy is in recession, which indicates that it has begun? Let's look at the main characteristic signs of a recession.

1. Fall in GDP. Or a systematic slowdown in GDP growth rates. This is the most important indicator of a recession.
2. Decrease in production and consumption volumes. During a recession in the state’s economy, not only production decreases, but also consumption of goods and services decreases, the so-called. business activity.
3. Rising unemployment. During a protracted recession, due to a reduction in production volumes, job losses begin and unemployment rises.
4. Fall in real incomes of the population. Naturally, the level of real wages is falling, and the purchasing power of the population is declining.
5. Rising inflation. This is not obligatory, but also a common sign of recession in developing countries (in developed countries, on the contrary, deflation may even be observed).

All these and other negative signs taken together indicate that a period of recession has begun in the economy.

Causes of recession.

Let's look at the main reasons for the recession: why does it happen, what causes it? I’ll say right away that these reasons may be different, depending on the degree of development of the state’s economy and its type.

1. The emergence and development of new technologies. Oddly enough, this factor can cause a recession in economically developed countries. Thanks to the emergence of new technologies, many old ones become irrelevant, the demand for outdated goods and services drops significantly, and accordingly, their production does too. Until new goods and services are fully introduced into the market to replace old ones, the recession continues.
2. Falling prices for raw materials. And this reason, on the contrary, causes a recession in countries with a commodity economy (such as Russia). The budget receives less revenue, which needs to be compensated for somehow: taxes and fees are rising, social spending is being cut, etc. All this slows down business development and reduces consumption. A recession is occurring.
3. Crisis in the banking sector. Often one of the reasons for a recession in the economy is the so-called. overlending of the market. Banks give out too many loans, and at some point, borrowers become unable to repay them. As a result, small banks go bankrupt, large banks raise loan rates, tighten requirements for borrowers - all this slows down the development of production, trade, and consumption, causing a recession.
4. Force majeure circumstances. For example, wars, revolutions, mass protests, strikes, a sharp change in the economic or political course in the country, etc. All this also inevitably entails a recession in the economy.

Consequences of the recession.

Now let's look at what a recession leads to, what are its main consequences for the state's economy.

1. Fall in production volumes. During a recession, production always decreases.
2. Fall in trade and consumption volumes. Accordingly, trade and consumption volumes decline following production.
3. Declining purchasing power of the population. People's ability to purchase goods and services is also declining.
4. Rising unemployment. Due to the decline in business activity, the unemployment rate is rising.
5. Decrease in lending volumes, increase in loan rates. Banks are increasing the volume of problem loans, they are reducing the pace of lending and raising rates.
6. Increase in deposit rates. At the same time, financial resources are becoming more expensive, and banks are attracting deposits at higher interest rates. However, the volume of deposits does not grow, but rather decreases, because Most people's savings and temporarily free money decrease.
7. Fall in the stock market. During a recession, the value of company shares falls, because... investments in them become more risky.
8. Reduced investment. Many domestic and foreign investors are withdrawing their capital due to increased risks and decreased returns.
9. Devaluation of the national currency. The recession is also reflected in the foreign exchange market: the national currency begins to devalue, because trust and interest in it is declining (typical for developing countries).
10. Rising inflation. At the same time, the cost of goods and services is rising: enterprises, in order to survive with falling volumes, are forced to increase them (also typical for developing countries).

All this together leads to the main consequence of a recession – a drop in GDP. But an even more important point is that a recession is always followed by a phase in which everything is even worse, in simple terms. True, a recession is always protracted, and the bottom is often a short turning point, after which economic growth begins. Therefore, what is worse is a moot point.

Now you have an idea of ​​what a recession is in the economy, what are its signs, causes and consequences.

Be financially literate to make it easier to navigate the financial and economic processes happening around you and draw the right conclusions. See you again at !

Recessus- retreat) - in economics (in particular, in macroeconomics), the term denotes a relatively moderate, non-critical decline in production or a slowdown in economic growth. A production decline is characterized by zero growth in gross national product (GNP) (stagnation) or its decline for more than six months.

A recession is one of the phases of the economic cycle (conjuncture), following a boom and giving way to depression.

A recession most often leads to massive drops in stock market indices. As a rule, the economy of one country depends on the economies of other countries, so an economic downturn in one country or another can lead to a downturn in the economies of other countries and even a crash on world markets (see Black Thursday). Recessions are also characterized by many other signs of cyclical crises, for example, rising unemployment.

Causes

The causes of recessions can be different; explanations for recessions are closely related to the concept of business cycles in the economy. Different economic schools define the causes of recession differently; in addition, various economic fluctuations and recessions have different causes. N. D. Kondratiev explains the cycles and corresponding recessions of long waves by a change in technological structures. The reasons for the recession in Western countries and in Russia also differ. The latest recession in the United States and Western countries was provoked by the situation in the financial markets and the securities market, primarily mortgage-backed securities. The 2001 recession in the United States was associated with a fall in investment and a decrease in efficiency in new sectors of the economy, such as information technology. The 2008 recession in Russia is associated with a fall in world oil prices, low levels of production in non-resource sectors of the economy, and contradictory government policies. The continuation of the crisis in Russia in 2010 and 2011 is associated with the so-called “raw materials curse”, the growth of the public sector of the economy, rising taxes, the lack of reforms in the law enforcement system, leading to inequality among market participants, and monopolization of the economy. Politicians often have their own ideological explanations for recessions; recessions often lead to populists and leftist forces coming to power.

About the terms “recession”, “economic crisis”, “depression” and “financial crisis”

In the old days, we suffered from periodic economic crises, the sudden onset of which was called a “panic”, and the prolonged period after the panic was called a “depression”. The most famous depression of modern times is, of course, the one that began in 1929 with a typical financial panic and continued until the outbreak of World War II. After the 1929 disaster, economists and politicians decided that this should never happen again. In order to cope with this task successfully and without much hassle, it was only necessary to eliminate the word “depression” from use. From that moment on, America never had to experience depression again. For when another severe depression occurred in 1937-1938, economists simply refused to use this terrible name and introduced a new, more euphonious concept - recession. Since then, we have already experienced many recessions, but not a single depression. However, pretty soon the word “recession” also turned out to be quite harsh for the refined feelings of the American public. Apparently, our last recession was in 1957-1958. Since that time, we have experienced “downturns”, or even better “slowdowns”, or even “deviations”.

Notes

see also

Links

• Recession of the American economy - background, opinions, analytics.
• Bryzgalin A.V. Crisis and taxes. TAXES AND FINANCIAL LAW, 12/2008
• Akaev - WILL THE SECOND WAVE OF THE GLOBAL RECESSION COME IN JULY-AUGUST 2011?

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Synonyms:

See what “Recession” is in other dictionaries:

Recession- a phase of the economic cycle characterized by a weak but steady deterioration in economic indicators, primarily a decline in GDP. Also, during a recession, unemployment increases, the volume of investment in fixed capital decreases, slightly... ... Banking Encyclopedia

recession- recession A slowdown or fall in the growth rate of the gross national product. A deep recession is called “depression.” The process of economic growth is, as a rule, cyclical in nature: from boom to... Technical Translator's Guide

A reduction in the production of real national product lasting six or more months. In English: Recession See also: Economic cycles Financial Dictionary Finam. Recession A slowdown or decline in the growth rate of gross national... Financial Dictionary

- [lat. recessus retreat] 1) geogr. sea ​​tide; 2) geogr. glacier retreat; 3) economical slight or short-term economic DEPRESSION, stagnation, drop in economic activity; fall in market conditions (CONJUNCTURE). Dictionary… … Dictionary of foreign words of the Russian language

Recession- (recession) a time-limited decline in production or a slowdown in the rate of its growth (capable of developing into a full-scale economic crisis). The duration of a decline sufficient to be called a recession is estimated by different... ... Economic and mathematical dictionary

Recession, break Dictionary of Russian synonyms. recession noun, number of synonyms: 4 depression (30) stagnation ... Synonym dictionary

A decline in production or a slowdown in its growth rate. Dictionary of business terms. Akademik.ru. 2001... Dictionary of business terms

A relatively moderate, non-critical decline in production or slowdown in economic growth. Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B.. Modern economic dictionary. 2nd ed., rev. M.: INFRA M. 479 p.. 1999 ... Economic dictionary

RECESSION, recessions, many. no, female (from Latin recessio retreat) (biol.). Gradual disappearance, removal of some hereditary characteristics in the body. Ushakov's explanatory dictionary. D.N. Ushakov. 1935 1940 … Ushakov's Explanatory Dictionary

A break in sedimentation without a change from sea to land. Observed on the bottom of the seas, in the region. strong bottom currents that carry away all sediments and even erode the seabed. See Scour. Geological Dictionary: in 2 volumes. M.: Nedra. Edited by K. N. Paffengoltz... Geological encyclopedia

English recession; German Rezession. 1. Temporary decline in production or slowdown in its growth rate 2. Return of conquered territories. Antinazi. Encyclopedia of Sociology, 2009 ... Encyclopedia of Sociology

The business activity of any enterprise or the economy of an entire state includes several stages. First there is a rise, then the work reaches its peak. Sooner or later, a decline occurs, which may end in complete decline. The third stage, preceding the crisis, is predetermining. This stage is called a recession. Let's talk about it in the article.

general information

There are two ways out of the recession. An economic recession can lead, as mentioned above, to the complete decline of the country with all the ensuing consequences. A decline in activity can also be used by the state government to find solutions to pressing problems that will allow it to enter a new growth cycle.

Concept

The state of the economy, which often occurs after all indicators have increased and has a non-critical decline in production, is called a recession. During this period, there has been a deterioration in key indicators that influence macro indicators. The fact that the economy is in recession is evidenced by:

1. Decrease in GDP indicators.
2. Decrease in income of the population.
3. Deterioration of investment attractiveness.
4. Decrease in production volumes of industrial enterprises.
5. Decrease in consumer activity.

An economy in recession means that the country has entered a bad period. During it, enterprises reduce production speeds, produce fewer goods, citizens receive reduced wages, which is why they begin to save.

Causes

An economy in recession may be due to:

1. Collapse in gas and oil prices. Their decline leads to economic decline in states where these resources act as a key strategic product.
2. Active growth in the cost of raw materials. It can be triggered by increased consumer demand and excitement.
3. Issuing an unacceptable number of high-risk mortgages.
4. Decrease in production volumes in all industries.
5. Reductions in salaries and other incomes of citizens. This entails, accordingly, a deterioration in the population.

What happens in the economy after the recession process? The consequence of a recession inevitably becomes a depressive state or a crisis. According to all economic laws, it will not be possible to avoid such a state. However, thanks to the work of analysts and other specialists, the process can be significantly smoothed out. The work of the highest government minds will reduce the negative effect of the recession and reduce the scale of the consequences.

Scope of distribution

If the economy of a country is in recession, this can lead to negative consequences not only within that state. There is currently active international cooperation. The economic activities of one country may have a close connection with certain sectors in other countries. Thus, a decline in one subject will inevitably lead to a deterioration in the situation in another. This, in turn, could lead to a global world crisis. Thus, in particular, according to a number of analysts, the EU economy is in a deep recession. Within the framework of international relations, during the recession there has been a decline in stock exchange indices. As a result, the national currency of a country whose economy is experiencing deterioration depreciates. This, in turn, raises the possibility of default on external debt. When the economy is in recession, it is mainly the businesses operating in the country that suffer. They are faced with the need to reduce production volumes due to inefficient consumption of goods. Late payments for delivered products lead to tax and salary arrears. As a result, enterprises that are not prepared for the crisis are declared insolvent (bankrupt). The impact of the recession is also acutely felt by direct consumers of goods. The population receives lower salaries, people become insolvent, cannot fulfill loan obligations, and fall into debt traps.

Classification

When the economy is in recession, experts analyze the reasons for this situation. Based on this, the type of recession is determined:

Period

A recession in the economy is recognized if a decrease in production volumes and a deterioration in gross indicators occurs for more than six months and begins to take a protracted nature. The duration of such a period will directly depend on the reasons that caused this situation. For example, if there is a recession of a political or psychological nature, then the duration of the recession can be reduced by regaining the trust of the population and businessmen. To achieve this, loyal measures are applied in the areas of lending and social security. The situation is different with an unplanned recession. As mentioned above, it is quite difficult to predict such a decline. It depends on negative global factors. A state experiencing a decline in production cannot influence them. In such a situation, the only thing analysts can do is to develop measures aimed at maximally smoothing out the negative effects.

Recession in Russia

The state of the domestic economy directly depends on the performance of the oil and gas market. The rapid fall in energy prices entails a number of negative consequences for the country. First of all, the amount of revenue that goes to the budget fund from the sale of strategic products decreases. begin to fall, followed by a weakening of the ruble. The decline in production causes a decrease in citizens' incomes. Consumer activity of the population is deteriorating. With a simultaneous decrease in citizens' incomes, prices for services and goods rise. The economic decline in the country is also due to external factors - sanctions from a number of countries around the world. Since 2015, relations with various international corporations have been severed, which has jeopardized the functioning and development of large enterprises and had an extremely negative impact on the GDP indicator. As experts noted earlier, this situation could last until 2017. However, today the situation may change if an agreement on freezing oil production volumes comes into force.

Recession and stagnation

These two concepts have significant differences. A recession is characterized as a moderate economic downturn. At the same time, stagnation is characterized by a complete stop of key strategic sectors. In this period:

Conclusion

During a recession, the process of reformatting the country's economic regime begins. Specialists develop and implement plans for the further development and re-equipment of the main sectors of the national economy. At the same time, stagnation does not provide for any positive dynamics and adaptation to the new reality. As a result, the country reaches the last stage of its cycle, and a deep economic crisis begins.

Recession- a phase of the economic cycle characterized by a weak but steady deterioration in economic indicators, primarily a decline in GDP. Also, during a recession, unemployment increases, investment in fixed capital decreases, and the general standard of living of the population drops slightly, especially for those who receive wages or income from business (unlike recipients of government payments and rentiers, whose situation does not worsen).

In some countries, various government agencies officially announce the onset of a recession under certain circumstances. For example, in the United States, the Business Cycle Committee of the National Bureau of Economic Research defines a recession as “a significant decline in business activity across the economy over several months, usually reflected in deterioration in real GDP, real income, employment, industrial production, and retail trade.” In the UK, a recession is recorded by the Office for National Statistics when GDP declines for two consecutive quarters.

There is a common joke among economists and the business press to explain the difference between a recession and an economic depression: “If your neighbor loses his job, it’s a recession; if you lose your job, it’s a depression.”

There is a well-known paradox associated with the definition of a recession: given that data on quarterly changes in GDP in developed countries are published with a long delay, and subsequently can be significantly revised, the official announcement of the onset of a recession is often made several months after it has already ended. At the time of the announcement of the onset of a recession, the country's economy is either in a state of severe crisis or at the stage of a new recovery. Accordingly, official data on the recession are mostly of historical interest and are not reflected in the behavior of economic entities. Therefore, forecasting GDP fluctuations, based on indirect indicators and not highly accurate, plays a significant role in economic decision-making by the government and entrepreneurs. At the same time, in modern economic science there is no consensus regarding the causes of the recession and ways to quickly overcome it.

Economists distinguish several types of recessions - according to the conventional form of the graph of changes in GDP. A V-recession is characterized by a relatively strong and rapid decline in GDP (not reaching, however, the level of depression) with a clearly pronounced single dip and subsequent rapid recovery to the previous level. A U-recession is characterized by a relatively long and stable (without up-and-down) stay of GDP at a low level, followed by a rapid recovery. During a W-recession, there is a short-term “bounce” of GDP growth into the positive area in the middle of a recession, i.e., it is similar to two V-recessions in a row. Finally, an L-recession refers to a rapid decline in GDP followed by a long, smooth recovery.

Recession is a common occurrence in the economies of developed countries. The US has seen more than ten recessions since World War II alone, and the UK has seen at least five. With the growth of globalization, global recessions begin to occur, affecting several countries simultaneously (for example, in 1998, 2000-2001 and 2008-2009).