It is now 10 years since the last global economic recession in 2009 and economists now say another may be on the horizon, and the avalanche is set to start falling from Europe this time.
In the fourth quarter of 2018, Italy and Turkey entered an economic recession after posting consecutive declines in gross domestic product growth rate in the second half of the half while three other economies narrowly escaped recession.
In economics, an economic recession is a business cycle contraction when there is a general slowdown in economic activity over two consecutive quarters. As of the third quarter of 2018, not less than five European economies were on the brink of slipping into an economic recession after posting negative GDP growth due to contraction in economic activities.
Out of the 13 largest economies in Europe, two entered a recession (Italy and Turkey), three narrowly escaped a recession after reporting negative economic growth in Q3 (Germany, Sweden and Switzerland), another three countries reported slower growth in Q4 than Q3 (UK, Russia and Poland), three posted flat economic growth (France, Belgium and Austria) and only two saw their economic fortunes slightly improve (Netherlands and Spain), raising fears that Europe may slip into its first recession in five years.
According to the Financial Times, this prompted the European Central Bank (ECB) to respond proactively by “reviving a crisis-era stimulus programme after two years of weaning the eurozone off its easy money policies, a sign of rising concern over the region’s faltering economy.”
The new monetary policy dubbed Targeted Longer-Term Refinancing Operations, would see the ECB hold a series of auctions of multiyear loans at low rates to stave off a collapse in lending — the first time it has reopened the programme in nearly three years according to FT.
The monetary policy decision to make a fresh offer of cheap loans to eurozone banks was coupled with a signal it would keep interest rates at historic lows until next year, as fears that the economy may the too weak to manage a higher interest rate continued to echo from the Central Bankers.
In a sign of how concerned ECB policymakers have become, they severely downgraded projections for the eurozone’s gross domestic product growth this year to 1.1 per cent from a forecast of 1.7 percent just three months ago. Inflation forecasts were also cut, with price rises now set to undershoot the bank’s 2 percent target all the way out to 2021.
“It will be a miracle if Europe doesn’t enter an economic recession towards the end of this year,” said Maju Eldad, Lecturer in Economics Department at Federal University of Kashere, Gombe. “Four of its largest economies are struggling to grow. Britain reported its slowest growth in years last quarter and is facing higher uncertainties due to its no-deal Brexit. Italy is already in recession, France posted flat economic growth of around 0.3 percent again and Germany, europe’s biggest economy, narrowly escaped recession with 0 percent growth.”
“If Europe enters a recession, it will not be too long before they will be joined by America due to their close trade ties and financial interconnectedness, potentially putting an end to the longest ever economic expansion in America. The biggest risk to America now is Europe, not the “Fed” or Trump. If America goes under too, the world will follow,” said the gloomy economist.
Euro Area GDP growth rate improved slightly from 0.1 percent to 0.2 percent as only two economies posted negative growth, helping raise economic expansion by 10 basis point. Euro Area has failed to expand its economy up to 1 percent since 2009 and barely recovered from its last economic recession in 2013.
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