Global Recession 2020

Fund release by different countries
Fund release by different countries

Global Recession 2020 let’s discuss. IMF, that is, International Monetary Fund has said that due to the lockdowns because of the corona virus

the economy worldwide has already been hit by recession

Infact, according to them, not only will this recession be worse than the 2008 Global Recession Financial crisis

but it will be the worst economic recession in the past 100 years

after the Great Depression of 1930s

In today’s article, I’d like to explain its economic impact upon the world economy

What is the current status? What is expected to be the condition of the world economy in the coming future?

What impact will it have on your jobs and studies?

We will get to know all of this in today’s article

Come, lets describe

Recession vs Depression

First of all, what is the difference between economic slowdown, recession and depression?

You must have heard these three words quite frequently

Recession vs Depression

The difference amongst them is – Economic slowdown happens when the GDP growth rate is low

it is not negative- it stays in the positive, but it is lesser in comparison to the previous years

For example, we have been seeing economic slowdown in India in the past few years

due to the bad policies of the government

But economic slowdown does not mean recession

Most of the economists describe recession as when the GDP frown rate of a country goes into the negatives

for two quarters or more

and depression is a worse condition than recession

Depression is basically recession over a long period of time

It is defined as a minus 10 or even lower GDP growth rate of a country

for a period of three years or more

Depression is such a terrible condition that over the past 150 years,

the world economy has faced depression only once

The Great Depression of 1929

You must have read about it in the history books- The great depression went on for more than 10 years

the GDP growth rate of the world economy had almost touched -15%

The unemployment rate in most of the countries was 25-30%. Those were appalling conditions

Such a bad economic state worldwide has never happened since then

For comparison, the Global Financial crisis of 2008

saw the worldwide GDP fall by a mere 1%

So you can compare -15% and minus 1%

The Global Financial crisis of 2008 is referred to as the Great Recession

Global Financial crisis of 2008

Today’s recession is compared with the recession of 2008 and the 1930’s depression by a lot of people

But most of the economists are of the opinion that the condition of today

is going to be worse than the recession of 2008

This is already visible in the data

For instance, consider the example of France

The quarterly GDP growth rate of the first three months in France has been calculated to be -6%

This is the worst performance in the history of France ever since World War 2

It is being predicted that the GDP growth rate in the second quarter in Germany is going to be minus 10%

Compared to 2008, there are some critical differences in today’s scenario

The first being that the people today are not working due to the lockdowns

When recession had struck in 2008, some banks did collapse and some people did lose their jobs

But on the whole, the economy was still running and the people were still working

which is not possible today

A lot of companies did try and inculcate work from home

But think about it- there are so many industries and sectors where work from home is not possible

For example,

Sports industry- Cricket, football, tennis and almost all the sporting events and matches

have either been cancelled or postponed

Think about many jobs were dependent on it

The ones who organize such events, the ones who work in the stadium- have all become jobless

IPL cancel

They do not have any means to get their salary

The Olympics got cancelled. It was going to be held in Japan in 2020

Now, it has been postponed until 2021

It is extremely likely that IPL will be postponed too

Travel and aviation industry- it is one of the hardest hit industries

Hotels, airlines, travel agents, tour group organizers, air hostesses, pilots, the people working at the airports

All of these people are unable to work and earn their salaries right now

Film and entertainment industry

Cinema halls have been shut down. The people working at the cinema halls (are unable to work )

The screening of films has been halted. The film production has been stalled

So the people employed to make these films- I’m not talking about famous actors and directors

Break to movie release

Thousands of people are employed to make a film. They have no livelihood right now

Concerts and theme parks have been shut down. Artists have become unemployed because of this

Technology industry is an industry that has remained neutral to some extent

There have been some negative effects for sure

(In the field of) Manufacturing- where plants and factories were forced to be shut down

So Apple, too, is no longer a trillion dollar industry

There have been delays in the shipments of Apple

There have been delays in manufacturing too, but

due to “Work from home” a lot of people are ab;e to work and

There are some apps like- Zoom video app, Skype and Google hangouts

There have been a tremendous growth in these apps because now people are communicating through these

Netflix, Amazon prime and online gaming are among the select few sectors that have profited

Restaurant industries is also one of the worst hit industries

People have curtailed going to restaurants and so the restaurant owners are unable to garner profits

So all the people employed in restaurants are becoming jobless

Now, if the business is down in so many different sectors,

departments for restart 2021

so barring a few, almost all the companies would incur losses

And if a company incurs losses, then it would want to save money

And what would the companies do to save money?

Job losses and salary cuts

Either they would not pay the salaries to their employees and cut their salaries

or they would layoff their employees from their jobs

This is exactly what is happening across the world

Either their salaries are being cut or they are being laid off from their jobs temporarily or permanently

For example, Tesla has slashed the salaries of all of its employees by 10%

reduces salary by marriott

Marriott – the world’s largest hotel company

They have slashed the salaries of their senior executives by 50%

And they are laying off almost 10,000 workers from their jobs

The Norwegian and Scandinavian airlines have laid off 90% of their employees

The International Labour Organization has predicted that 38% of all employees in the world

are either at a risk of layoff or a salary cut

It has been predicted that more than one billion workers in total

will either face salary cuts or job losses

and 2.7 billion workers will be directly or indirectly affected in some way or the other

by the lockdowns due to the corona virus

Now, there are very high chances of you too being laid off from your job for a few months

or your salaries will be cut

What will be the right course of action in such a situation?

One (way) would be to waste your time by watching a new film on Netflix daily

or you could utilize this time to learn something new or to learn a new skill

In my opinion, it would be a very good decision

if right now, you utilize this time to upskill yourself

so that when the situation returns to normal,

and the people resume their jobs, then your skills are better in comparison with the rest of the employees

and you are better than the others. (so that )You get a better salary and do better at your job

A good way to do this is to watch free lessons on YouTube to learn anything new

for example, if you want to learn a new language or coding or animation

The possibilities are infinite

You can learn anything new to make yourself better

Disaster for small businesses

the big companies can afford to pay salaries to their employees and to let them retain their jobs

but what will become of those small businesses that were running their business on a month to month basis

Job less daily worker

and they would not be able to bear losses of more than 2-3 months

They are anyway going to fire their employees and would incur losses themselves

This is being witnessed quite a lot in India

The migrant workers in India have become jobless

They neither have jobs nor do they have money to eat

This is why we get to hear cases where the migrant workers have come out on streets

There is stone pelting and demand of salaries

They are demanding that they be given atleast transportation to go back to their villages

This was seen in Surat where there was stone pelting and
the migrant workers had blocked the road

Recession Impact on future

The rest of the companies for which work from home is possible and the education sector

There is a very high potential of innovation from these areas during this recession

Because these companies and our schools and universities are trying to look for new ways

to get the employees to work from home and to get the students to study from home

2020 work from home chart

Through online video conferencing and video calls and through online streaming

we are able to stay in contact and transform studies

It might be in the future that a major shift is seen in the educational sector

where more and more online classes would take place

even after the withdrawal of this lockdown

The use of automation by the companies will be sped up and some economists even believe

that the commercial real estate sector might slip down after this lockdown is over

because a lot of companies will realise that since they are telling their employees to work from home

so what is the need of calling them to the office?

If work from home is happening in a proper manner

so why should they pay for transportation and the rent of the office?

When all can work from home, they would not do it (i.e, pay rent and transportation)

It might be that a lot of companies realize this and work from home is continued

The commercial real estate prices might fall because of this reason

But this has its own downsides

Because it might have a negative impact on the mental health, productivity and efficiency of the people

by staying at home everyday and permanently working from home

When will global recession 2020 end ?

Comparing today’s recession with the 2008 recession again,

Some economists believe that there will be problems in the short term but not as many in the long term

tiack swan event

Because all the prior recessions in the world have all been due to some structural economic problem

But this recession is basically happening due to voluntary choice

The countries themselves decided to implement lockdowns

and that the people will stay at home and they will not work

This is why this recession is happening

But as soon as the countries remove the lockdowns, the people would resume their jobs

then the situation would revert to normal

This is why some economists believe that the situation would quickly revert to normal

Not that massive problems would arise. And the countries themselves have decided

to implement the lockdowns so the countries will also decide themselves

as to how to compensate the people for that short time when they are unemployed

and how to support the companies that are unable to run their businesses

So if the people and the companies are supported in a proper manner

then there would not be a massive negative impact in the long run

And observing historically, whenever recession has struck, the economy bounces back in the long term,

Have a look at this chart of the GDP growth rate of the US

The blue shaded areas depict when there was recession in the US economy

Now observe how quickly the economy bounced back after recession

And this is exactly why the countries across the world have announced economic relief packages

How much money would they spend on the public and the companies of the country

in order to support them

so that people have enough money for food and their daily expenses

The companies have sufficient money to run their businesses in order to prevent them from shutting down

A lot of different countries have spent different amounts of money

Money distribution in world

But USA is at number 1, which has spent 11% of its GDP to help its citizens

2.3 trillion dollars

Germany is at the second spot. It spent 4.9% of its GDP- 189 billion dollars

China – 169 billion dollars

Australia- 133 billion dollars

All of these countries have put in around 8-9%, sometimes 10-11% of their GDP in economic relief packages

For comparison, India has not done much yet. A mere 0.8% of the GDP has been put in the relief package

to aid the public

More relief packages in the future have been promised

So we will see how many economic packages are announced by the government

to aid the people during this recession

I hope you would have found this article to be informative

Share the article.

so that I may continue to make such economist article for you in the future

We will meet again in the next article
Thank You, stay connect with us.

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