What's a Global Recession?

Real Time Economics, on the IMF

Its latest forecast, released this morning, now forecasts a 1.3% contraction for this year. (It’s been a lousy year for forecasters all over the world.)

Now, IMF economists have cranked through the numbers and come up with a more precise way to measure global recessions: a decline in real per-capita world GDP, backed up by a look at other global macroeconomic indicators. Those indicators include industrial production, trade, capital flows, oil consumption and unemployment.

By that definition, this is the fourth global recession since World War II, and deepest by a long shot. The earlier recessions were in 1975, 1982 and 1991. All were one-year recessions when measured by purchasing power parity, which the IMF favors for global comparisons. Those stats take into account the different cost of goods and services in different countries — for instance, a haircut costs a lot less in Beijing than Boston. Looking at global GDP by the more traditional method using exchange rates, the 1991 recession lasted until 1993.

In 2009, the IMF estimates per-capita GDP will decline 2.5%, using purchasing power parity, compared to a 0.4% contraction, on average, during the three previous recessions. Industrial production, trade, capital flows and oil consumption in the 2009 recession will fall much more sharply than in the previous global recessions, while unemployment will increase more.

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