The Great Recession in 2007 – 2009
Throughout history, the global economy has experienced several periods of recession. Their occurrence can be influenced by a multitude of factors including economic cycles, financial crises, etc
The occurrence of recessions is not uniform across all countries or regions.
In the past seven decades, the world economy has experienced four global recessions: in 1975, 1982, 1991, and 2009.
The World Bank analysis found that real GDP per capita and other global economic metrics fell, disrupting economies and financial systems worldwide.
The Great Recession r efers to a significant and widespread economic downturn experienced by various national economies worldwide, spanning from the latter part of 2007 to 2009 The recession exhibited variations in scale and timing across different countries, as evidenced by the low percentage of Real GDP growth during this period, as depicted in the map below:
Causes:
The transition of U.S. housing market from boom to bust, resulting in a significant devaluation of mortgage-backed securities (MBS) and derivative financial instruments.
The inability of banks to extend financial resources to businesses, coupled with the inclination of homeowners to prioritize debt reduction over borrowing and consumption, contributed to the onset of the Great Recession.
(GDP) experienced a significant decline in 2009, reaching its lowest point in the majority of the top 20 countries globally.
Could a Financial Crisis Happen Again?
Despite measures to avert a similar crisis, the financial sector is nevertheless vulnerable:
– high levels of debt in the global economy.
– Use of complex financial instruments, such as derivatives, which can be difficult to understand and value.
– The interconnectedness of the global financial system Lack of effective regulation
– Despite the central banks control and the new regulation, there are still gaps particularly in the banking sector regulations.
It is essential to remain vigilant and continue to strengthen the resilience of the financial system to reduce the risk of another crisis.
References :
https://databank.worldbank.org/source/world-developmentindicators/Series/GC.NLD.TOTL.GD.ZS
https://www.imf.org/en/Publications/Search?#q=recession&first=10&sort=relevancy
https://www.indiatimes.com/worth/news/list-of-last-four-global-recessions-and-why-they-happened-598993.html#highlight_142741