A global recession is a period of slowing economic activity that affects multiple countries and regions. It occurs when a number of major economies are contracting at the same time, resulting in a sharp decline in GDP growth. The term is usually defined in a similar way to national recessions: by the National Bureau of Economic Research (NBER), which considers a wide range of factors when declaring and dating business cycles, including indicators like employment, production, real income, and other key metrics.
While many factors can cause a global recession, the most common are a collapse in consumer demand and a reduction in business spending. When consumer spending declines, companies cut back on production, which reduces employment and slows the economy. Economic uncertainty is another major driver, with consumers and businesses fearing the future and reducing spending or investment decisions. Wars and pandemics can also contribute to economic uncertainty by generating volatility in global financial markets.
Although the risk of a global recession has receded somewhat since 2023, the world economy remains vulnerable. Two G7 economies slipped into recession at the end of last year, and the latest World Economic Forum Chief Economists Outlook survey suggests that more than half of respondents expect weak growth this year. In addition, rising geopolitical risks are driving up prices for oil and other commodities, which could add to the slowdown.