Definition: What is a recession?
The term recession means decline. It comes from Latin. Experts speak of a recession when an economic output does not grow or stagnate – but shrinks. It is then in a downturn. This is noticeable, for example, when the demand for goods and services decreases.
Economists use gross domestic product (GDP) to measure the overall economic situation – the economic cycle. It measures the value of the services and goods that a country produces in a certain period of time. It is one of the four phases that the economic cycle of an economy can go through. It follows the phase of the boom and can, in the worst case, go into a depression. A depression is followed by an upswing.
Inflation, supply bottlenecks, rising interest rates: there have already been much better times for the economy in Germany. The economist Alexander Kriwoluzky from the German Institute for Economic Research has already warned: “The danger that we will slip into a prolonged recession is real.“ Many experts, including Veronika Grimm, among others, expect that Germany will slip into recession in the second half of 2022.
Both the war in Ukraine and the corona pandemic are throttling Germany’s economic performance. Calculations by the Ifo Institute for the Handelsblatt show: compared to the fourth quarter of 2019, Germany will have grown by only two percent by the end of the current year. Consumer sentiment is also as bad as it was last time in 1991, according to the GfK market research barometer, which signals a sharp decline to minus 36.5 points for September. The barometer is falling for the third time in a row.
But is Germany really slipping into a recession? And what does it mean when a country is in an economic downturn? Read the detailed explanation here.