When a global recession occurs, it means that economic activity around the world is slowing or falling. These declines are largely the result of higher uncertainty, which makes consumers and businesses cautious about spending and investing (Baker et al., 2022). This uncertainty can spread from one economy to another and lead to a worldwide economic downturn.
Historically, global recessions—which are sometimes referred to as synchronized recessions—have followed similar patterns. The most recent example is the Great Recession that began in late 2008 and continued into 2009. As the financial crisis ravaged advanced economies, many emerging markets experienced a sharp contraction in growth while others remained relatively healthy (notably China, India, Indonesia, and Brazil). Those economies often benefitted from not being as integrated into the U.S.-led system of global finance and from exporting fewer elastic products on the world market (that is, they were less sensitive to declines in global consumer demand).
In contrast, smaller economies are more vulnerable to global economic trends. In 2023, almost all chief economists expect moderate or strong economic growth in the Middle East and North Africa and South Asia but nearly nine out of ten believe that growth will be weak in Europe, the US, and Japan. These divergent views underscore how the global outlook remains highly uncertain despite the fact that the COVID-19 pandemic caused most countries to shut down their economy in early 2020, with disproportionate impact on workers in industries and occupations that paid low wages and required face-to-face contact.
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