Free 770 words essay on global recession and impact on various sectors for school and college students.
The term ‘Global Recession’ represents a short period of decline in the economic condition during which the market shares and individual transaction related activities are reduced. Until today, the entire globe has experienced and witnessed a number of such recessions that has brought down the business market a pause. This has also left valuable lessons for the investors to be learnt for future dealings.
Globalization and liberalization have underwritten quite a lot in making this entire world a close knit unit in terms of economic conditions. This recession in one country has the potential to upset the economic condition of other countries around the globe in a major way, thus contributing to global recession. The economic recession in the US economy during the year 2008 swamped the entire world in its clutch.
A Global recession is classically accompanied by a fall in the trade market, an upsurge in unemployment, and a debility in the housing market. It is a general consideration that a recession is less severe than a depression. But if a recession seems to continue for a long period, it is usually then classified as a depression. Basically, recessions are believed to occur by a rapid and widespread drop in spending. Recessions are responded differently by different sectors. Governments usually respond to recessions by increasing the supply of money, spending by the government and decreasing the taxes.
Global Recession Cause:
Recession is a pattern that fall in the normal economic cycle. As per the cycle, an economy generally grows for 5-8 years and then moves to the next phase called ‘recession’ for about 6 months to 2 years. This phase of recession usually occurs when the general public loses their confidence in the market growth and tend to spend lesser. Thus, there is a lesser demand for goods, which leads to a lesser demand in production, resulting in layoffs and thus unemployment. The market Investors tend to invest less as they fear that the stock values might fall.
Global Recession Impact on various sectors:
Global Recession affects almost all sectors. Few explanations are as below:
Employment: Due to global recession there is a rise in unemployment. It takes time for employment to rise. But during global recession, unemployment rises drastically
Government: A recession is a bad news for everyone, especially Government. During recession, as the income of the public goes low, it leads to lower tax revenues such as income tax and corporation tax. Due to this, the Government tends to borrow. As the Government borrowings increase, this leads to high tax returns and higher interest rates in the future.
Market Shares: Recession leads to lower profit and lower dividend. Hence shares turn out to be less attractive. The truth is that, share prices tend to fall even before recession in anticipation of a recession. And during the course of a recession, share prices usually increase anticipating a recovery. On the other hand, fall in share price does not always mean recession. Share prices can fall for various other reasons also.
Business: Due to recession, Investment is much more unstable than economic rise. Even a slight fall in the growth rate can lead to a significant fall.
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Inflation: Practically, recession reduces demand, this in turn reduces wage inflation, thus lowering the inflation rate. Yet, this recession is complicated because of the rise in export and import. Hence, the upcoming recession may actually occur simultaneously with greater inflation. This is called as “stagflation”. But, a recession will definitely reduce the pressures on the inflation driven by demand and boosts the wars regarding price in the market as big firms seek to retain consumers.
Tourism sector: The tourism sector is also affected due to recession. There is less spending of money. So, people try and stay indoors more of the time, hesitating to spend or waste money.
Agriculture: Agriculture is a supreme, producing the basic human needs like food and clothing. There is less investors during and due to recession. Hence there is not much money spent for the agriculture. This result in further unemployment of the farmers. In turn, there is not much production or cultivation of food items.
Tackling the Global Recession:
The following measures can be adopted to confront the Global recession:
- The Government can introduce Tax cuts
- Government should spend more to create more employment and job opportunities, especially in the manufacturing sectors.
- Export should be tried to be increased by the Government
- Property holders should reduce the unrealistic prices of property to attract the investors
- The price of the oil can be reduced to attract the importers in other countries.