Are We Already in a Global Recession?

Abstract

The paper discusses the question if the global economy already entered a phase of a global recession. This is based on the IMF definition that a global recession occurs if global real GDP growth falls below 3%. Taking actual GDP numbers for the Chinese economy published by the Conference Board for the last and the current year and correcting the contribution of China to the global growth accordingly, one finds that instead of the official global GDP growth 0f 3.1% published by the IMF it would be significantly lower at 2.6%. In the following sections the author looks for further empirical evidence to support the more pessimistic view resulting from the different statistical data for China. The stock market crashes in China last year is a key indicator that something extraordinarily happen on the financial markets. Furthermore there are other indicators which give evidence that this spilled over into the Chinese economy and could not be contained to the financial sector. Since China is already in a complicated transition process to escape the middle income trap by upgrading their economy towards a more high-tech oriented internationally economy this had unexpected negative repercussion on the Chinese growth. Furthermore there is evidence that the World Economy Outlook published by the IMF has systematically been biased upwards concerning the global GDP growth in the past. The author therefore concludes that it is a risky strategy to not take major steps to stabilize the global economy by a joint-effort of the G20 countries now. Complacency could have dear consequences if the current global recession gets worse in the coming year. It is not only China which has a fragile economic environment but the Japan, the US and the EU as well as other BRICS-countries are in a bad shape to support the global growth in the near future.