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Recently, one of the most talked and disputed issues among economic writers and global organizations such as the IMF and the World Bank is that the world is moving towards Recession in 2024 or that the year will be the year of the Global Financial Crisis. On the other hand, we think it is weird that economists and international organizations also argue that 2024 may be global depression year without fully revealing what a recession is.
In this point, considering that we live in a global world, we think that it is important that everyone living in the age of technology and want to improve themselves should have at least brief and basic information on this subject. In addition, you need to have basic knowledge on such subjects in order to ensure your personal development and walk confidently on the career ladder. Remember, we live in a digital information age. This brings with it extreme competition. In this competitive environment, knowledge is power and we must increase this power, especially if we are going to work in the field of finance.
What is Recession?
At this stage, as writer team, we would like to inform you about some basic concepts about this subject even if you have not received economic education. We hope you will read it without getting bored and then you will improve yourself on this subject by researching it 😊
First of all, we want to explain the concepts of Recession and economic depression briefly for our friends who have not studied economics in school or university. In economies, important data is usually measured on a monthly or quarterly basis and then disclosed to the public. In this context, it could be said that if an economy shrinks for two consecutive quarters, that is, if its gross domestic product (GDP) decreases for two consecutive quarters, that economy is technically considered to be in recession. The expression of two consecutive quarters in this definition is a globally accepted measure and there is no definite reason. On the other hand, the statistical institutions of countries announce the GDPs of the countries on a quarterly basis generally.
Depression Definition
In addition, Globally, international organizations such as the World Bank and the IMF explain global Gross Domestic Product on a quarterly basis and we understand whether we are growing or shrinking 😊 On the other hand, the Economic Depression is a much more troublesome concept. If an economy cannot get rid of recession in successive periods, it is obvious that that country has gradually entered into an economic depression.
By the way, when the word Global Recession is mentioned, the global economic growth falling below 3 percent should come to mind. Accordingly, if global growth is announced as for example %2,9 this means that the world economy is now in it technically. In this context, since the necessary conditions are fulfilled in that example, it could also be called a recession.
What happened in 1929?
The most well-known example of the concept of the economic depression is the 1929-Great Economic Crisis in United States. This great economic depression started as a “demand shock” in the United States at that time and spread all over the world, leaving millions of people unemployed, homeless and hungry. As mentioned before, if an economy goes into recession, that is, if it shrinks for two consecutive periods, unemployment starts to increase gradually. After a while, with unemployment, the tax revenues of the state decrease and public deficits begin to increase. At the end of this crisis period, national income falls and this vicious-circle process starts again with unemployment. If a solution cannot be found for these overlapping recession processes, it will again reduce the national income and become an inextricable situation and turn into a great economic depression.
It is a well-known fact that such economic depressions cause great social and political explosions and destructions in countries since great income and welfare losses in people and society. Accordingly, in the United States, during the Great Depression of 1929, there were major social events and suicide cases along with major bankruptcies. With the effect of the tensions after the First World War, there was a sharp decrease in total demand. Due to impact of the gold money standard, the FED could not provide the cash it needed to the market. As a result of these developments, the process, which might be summarized as the demand shock turning into a great depression, had great economic, social and political consequences, first in the United States and then in the whole world.
Accordingly, due to deep and devastating effects, some academicians even consider the great economic depression of 1929 among the potential economic causes of World War II.
2024 Year of a Recession?
After our general explanations and short definitions, let’s try to answer the question of whether 2024 will be a Global Recession or a Global Financial Crisis in these days as we are rapidly approaching the last quarter of 2023. First of all, if you haven’t read it, click here Why did the FED increase interest rates? We recommend that you read our article. As it is well-known, the Fed continued to raise interest rates this month, signalling that it would continue to tighten monetary policy to fight inflation. In line with that, the European Central Bank (ECB) also continues to increase interest rates and unfortunately data from the other side of the world, namely China, continue to show that economic growth is slowing down.
At this point, it should be remembered that the head of the IMF, Kristalina Georgieva, said at the beginning of 2023 that the risk of Global Crisis is high for this year and that they expect about 33 percent of the world’s countries to enter a recession. At the same time, the OECD announced its world global growth forecast as approximately 2.2 percent this year, which increases the risk of crisis globally as it is below 3 percent. If you notice, they all talked about a recession, but none of them talked about a great economic depression 😊
No Recession in 2024!
After all these definitions, explanations and comments we can say that the possibility of a global crisis has passed, at least for this year, if we consider that we have passed the half of 2023. Accordingly, we expect that the sharp interest rate hikes by the US Federal Reserve, with a hawkish perspective, will slow down in 2024. In line with this, we can predict that even interest rate cuts may come in the last months of 2024, depending on the inflation developments.
At this point, depending on these developments, we can say that the risk of global recession, crisis and thus economic great depression for 2024 is low. On the other hand, in this context, we would like to point out that; All comments or predictions made are subject to the conditions that no sudden political or social crisis occurs worldwide and that the FED does not continue to increase interest rates.
Please note that even there is no global recession or crisis expectation for 2024 year, developments and all kind of the risks which could be turned into a great economic depression, just like the US great depression caused by the sudden demand shock in 1929, is closely watched by all world economics authorities. Please click here and read a detailed World Bank analysis for 2024 Global Crisis possibility.
