A global recession is a sharp decline in economic activity spread across multiple countries, lasting more than a few months and visible in production, employment and real income. It is less common than national downturns and can be triggered by a variety of factors. Some, like the Great Recession in 2008, were sparked by financial market stress. The collapse of Lehman Brothers and the failure or near-failure of a number of other financial firms that year led to a collapse in confidence, and investors withdrew capital from banks, causing them to be unable to lend. This, in turn, slowed business investment and household spending.
Other global recessions are triggered by rapid increases in debt. The credit booms that preceded the 2008 global financial crisis saw households and businesses take on excessive amounts of debt. When the bubble burst, these borrowers found it harder to meet repayments, so they cut back on consumption and investment. The result was a slowdown in GDP and higher unemployment.
While the risk of a global recession has faded, the world economy remains fragile. Rising debt levels in many advanced economies mean that they may be less able to respond to shocks. At the same time, rising yields on US bonds have crowded out investment flows into emerging markets, which will be less able to grow quickly enough to cushion any slowdown in the West.
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