Global Recessions
Global Recessions. The baseline statistical method identifies four declines (troughs) in annual real global per capita GDP, using market exchange rate weights, since 1950 – in 1975, 1982, 1991, and 2009 (Figure 4). The use of PPP weights rather than market exchange rate weights does not affect the dates of the troughs. However, with market exchange rate weights, which are tilted toward advanced economies, global per capita GDP growth is lower especially during global recessions when many advanced economies experience synchronized contractions in activity (Figure 5). With both sets of weights, the dates of peaks in the global business cycle are found to be 1974, 1981, 1990, and 2008, with the annual data showing each global recession lasting just one year.
Figure 4. Evolution of world output and world output per capita
Figure 5. Growth of world output
Some employ a definition of global recession that relies on a simple threshold. The findings here suggest that it is misleading to employ a simple growth threshold (such as below 2.5 percent annual growth in global GDP) to identify global recessions. For example, if one assumes that a global recession takes place whenever world real GDP growth with market (PPP) weights is less than 2.5 percent, there are 17 (11) global recessions over the period 1950-2019 (Figure 5). If per capita growth rates with market (PPP) weights are used and the threshold is 1 percent, then 14 (11) global recessions are identified over the same period. The annual growth of world real GDP needs to fall below 1.1 percent to register a contraction in per capita GDP given the population growth in 2019, but, of course, population growth is time variant with substantial changes from one decade to another.
The judgmental method is applied at the global level by looking at movements in several indicators of global activity – real GDP per capita, industrial production, trade, capital flows, oil consumption, and employment. This method also results in the same four dates as the years of global recessions: most of these indicators point to an obvious contraction in global economic activity in these years, after a peak in the preceding year. The behavior of the indicators during the global recessions is discussed below.
The turning points of the global business cycle identified using the quarterly data are consistent with those from the annual data series. The statistical approach identifies four global recessions in the quarterly series since 1960: 1974:1-1975:1, 1981:4-1982:4, 1990:41991:1, and 2008:3-2009:1 (Figure 6; Table 1). With the quarterly data, the average duration of global recessions was slightly less than one year. In addition to these four recession episodes, global per capita output contracted in 1970:4 (-0.7 percent), 1980:2 (4.8 percent), 1981:2 (-0.3 percent), 1998:1 (-0.2 percent), and 2001:3 (-0.5 percent).14 These contractions lasted for only a quarter without translating into global recessions. However, some of these short-lived global contractions were associated with recessions in major economies that took place ahead of global recessions (1982) or coincided with global downturns (1998 and 2001), as discussed below.
Figure 6. Growth of world output, quarterly
Table 1. Main features of global recessions and expansions (with quarterly series)
| Duration (quarters) Amplitude (percent) Average (percent) | |||
| Recessions | |||
| 1974:1-1975:1 | 5 | -9. | -2. |
| 1981:4-19824 | 5 | -5. | -1. |
| 19904-1991:1 | 2 | -1. | -1. |
| 20083-2009:1 | 3 | -15. | -5. |
| Average | 4 | -8. | -2. |
| Quarters with negative growth | |||
| 19704 | 1 | -1. | -1. |
| 1980. | 1 | -5. | -5. |
| 1981:2 | 1 | 0. | 0. |
| 1998:1 | 1 | 0. | 0. |
| 20013 | 1 | -1. | -1. |
| Expansions | |||
| 19752-19813 | 26 | 3. | |
| 1983:1-19903 | 31 | 3. | |
| 19912-20082 | 69 | 2. | |
| 20092-20193 | 42 | 2. | |
| Average | 42 | 2. | |
Global downturns. In addition to the four global recessions, the global economy experienced low growth in 1958, 1998, 2001, and 2012: in these four years, the global economy registered its lowest growth rates of the past seven decades, except for the years of global recession and the two years before and after each of them. World output per capita grew by slightly less than 1 percent a year, on average, over these four downturns (Table 2). These downturns fall short of qualifying as global recessions because world real GDP per capita did not contract and there was no broad-based weakness in multiple indicators of global activity.
Table 2. Output growth during global downturns
| Global downturns | Global recessions | Non-recessions | All years | |||||
| 1958.0 | 1998.0 | 2001.0 | 2012.0 | Average | ||||
| World | ||||||||
| Output | 2.2 | 2.5 | 1.9 | 2.5 | 2.3 | 0.3 | 3.9 | 3.7 |
| Output per capita | 0.2 | 1.1 | 0.7 | 1.2 | 0.8 | -1.3 | 2.2 | 2.0 |
| Output (PPP) | 2.7 | 2.4 | 2.3 | 3.2 | 2.7 | 0.8 | 4.2 | 4.0 |
| Output per capita (PPP) | 0.7 | 1.0 | 1.1 | 2.0 | 1.2 | -0.8 | 2.5 | 2.3 |
| Advanced economies | ||||||||
| Output | 1.6 | 2.7 | 1.5 | 1.2 | 1.8 | -0.4 | 3.5 | 3.3 |
| Output per capita | 0.4 | 2.1 | 0.9 | 0.6 | 1.0 | -1.1 | 2.7 | 2.4 |
| Output (PPP) | 1.5 | 2.7 | 1.5 | 1.2 | 1.7 | -0.4 | 3.5 | 3.3 |
| Output per capita (PPP) | 0.3 | 2.1 | 0.9 | 0.6 | 1.0 | -1.1 | 2.7 | 2.5 |
| EMDEs | ||||||||
| Output | 6.2 | 1.8 | 3.2 | 4.9 | 4.0 | 2.1 | 4.9 | 4.7 |
| Output per capita | 3.8 | 0.3 | 1.8 | 3.5 | 2.4 | 0.2 | 3.0 | 2.8 |
| Output (PPP) | 6.4 | 1.9 | 3.4 | 4.9 | 4.2 | 2.4 | 4.9 | 4.8 |
| Output per capita (PPP) | 4.0 | 0.4 | 2.0 | 3.6 | 2.5 | 0.5 | 3.0 | 2.9 |
In 1958, global growth was weak because of low growth or outright recessions in several major economies, including the United States and some European economies (Federal Reserve Board 1958; United Nations 1959). In the United States, monetary policy was tightened to control inflation. In some European countries, also, domestic demand weakened as policy measures to contain inflationary pressures were implemented. However, growth remained resilient in other parts of the world.
In 1997-98, economic activity in many EMDEs, particularly those in Asia, weakened sharply. In fact, the global economy experienced a contraction in per capita GDP in 1998:1 as the East Asian financial crisis took a heavy toll on emerging market economies in the region. However, the world economy did not experience a recession in 1998 because growth in advanced economies held up.
In 2001, many advanced economies experienced mild slowdowns or recessions: global per capita output declined in 2001:3, when per capita growth turned negative in a number of advanced economies, including the United States (-2.7 percent, annualized) and Japan (4.2 percent, annualized). However, growth in some major EMDEs, such as China and India, remained robust, helping the global economy escape a recession.
The 2012 global downturn was mainly driven by the euro area debt crisis. Although world per capita output did not contract in any of the quarters of 2012, growth was very low (0.4 percent in 2012:2). The global economy was supported by growth in the United States and some major EMDEs.
During these four global downturns, the behavior of other global indicators was mixed, again implying that these episodes do not qualify as global recessions. For example, industrial production, trade, and consumption did not suggest a broad-based weakness in the global economy in 1998. In 2001, although industrial production fell and the rate of global unemployment picked up slightly – and although equity prices and business confidence declined sharply and policy uncertainty increased significantly following the 9/11 terrorist attacks – both global trade flows and oil consumption continued increasing. During the 2012 global downturn, some activity indicators did not show much weakness, but capital flows slowed, equity prices collapsed, and inflation declined.
In 2019, the performance of the global economy looked somewhat similar to the previous global downturns. The current estimates suggest that global output growth in 2019 was lower than that in 1998 and 2012 but still higher than that in 1958 and 2001. However, when measured in per capita terms, estimated growth in 2019 was higher than that in any of the four global downturns. Although global labor markets were tight, global trade was quite weak in 2019. Since the available data for the full year are mostly estimates at the time of writing this paper, it is not possible to conclude whether the year 2019 constituted a global downturn.
The U.S. economy during global recessions and downturns. Although the four global recessions coincided with recessions in the United States, not every U.S. recession was associated with a global recession. In fact, the United States experienced six additional recessions during 1950-2019, including recessions in 1958 and 2001 that coincided with global downturns. But it grew strongly during the 1998 global downturn and, to a lesser extent, during the 2012 global downturn.