‘Hidden’ GDP losses assuage world recession fears

Subject

Imminent recession fears may be misplaced.

Significance

The worrisome factors putting the world economy at risk do not make recession inevitable by 2020-21. Sentiment is being buffeted and heavily depressed by febrile global governance and trade, as well as unusual economic tensions and volatility. However, a true global recession requires a synchronised shock to the world economy to affect most of the key economies and sectors. Whatever cyclical analysis suggests, especially for the United States, such large global events have no fixed timetable.

Impacts

• Each part of the global economy moves at its own varying pace, so it will take a severe and as yet unseen provocation to drive recession.
• A relatively unusual convergence of negative factors across key regions and sectors would be needed to generate a 2008-style crash.
• A sharp decline in world trade could trigger such a crash, but this might have little visible impact on official measures of real GDP.