According to the OECD’s current Interim Economic Assessment, the global economy is weakening, with key European countries experiencing a recession that is now affecting the rest of the world.
The G7 economies are forecast to grow at an annualised rate of only 0.3 percent in the third quarter of 2012, and 1.1 percent in the fourth, according to the Assessment, which was delivered in Paris by Chief Economist Pier Carlo Padoan. It cautions that the ongoing eurozone crisis is eroding global trust, stifling trade and employment, and hurting economic development in both OECD and non-OECD nations (see the presentation by the Chief Economist).
“Mr Padoan stated, “Our prediction suggests that the economic outlook has eroded dramatically since last spring.” “If politicians do not address the underlying reason of this worsening, which is the ongoing euro zone crisis, the slowdown will continue.”
According to the OECD, the euro area’s three largest economies – Germany, France, and Italy will contract at an annualized pace of 1% in the third quarter and 0.7 percent in the fourth.
Individually, the German economy is predicted to decrease by 0.5 percent in the third quarter and 0.8 percent in the fourth quarter. The French forecast is slightly brighter, with third-quarter contraction of 0.4 percent annualised followed by a 0.2 percent increase in fourth-quarter growth. The terrible recession in Italy will continue, with GDP decline of 2.9 percent in the third quarter and 1.4 percent in the fourth.
The poor economic prognosis is anticipated to bring unemployment even higher than it is now. “Mr Padoan stated that “resolving the euro area’s financial, budgetary, and competitiveness difficulties remains the key to recovery.”
Despite the fact that the United States is being impacted by the eurozone slowdown, growth is expected to be 2% in the third quarter and 2.4 percent in the fourth. Canada’s economy is expected to expand by 1.3 percent in the third quarter and 1.9 percent in the fourth. The Japanese economy is expected to fall by 2.3 percent on an annualized basis in the third quarter and remain around zero in the fourth.
“The forecast is threatened by a number of downside risks, including the possibility of further increases in already high oil costs, severe fiscal contraction, as seen in the United States in 2013, and further decreases in consumer confidence connected to prolonged unemployment,” Mr Padoan added.
Journalists should contact the OECD’s Media Division (tel: +33 1 4524 97 00) for more information.
Is there any country on the list that is experiencing a recession?
According to data from the Conference Board, Libya, Iraq, and Argentina have experienced the most years of negative GDP growth since 1951.
Apart from the “failed states” Libya and Iraq, Argentina has not witnessed a protracted civil war in recent years, despite the fact that the country experienced its fair share of insurgency during the dictatorship of Juan Domingo Pern in the 1950s, 1960s, and 1970s. Even yet, the country has struggled with economic problems in recent years, with on-again, off-again recessions. While Argentina is more developed than the other countries on the list, it has been mired in a cycle of excessive spending, inflation, debt-creation, unsustainable cuts to government programs, and poor fiscal management.
Venezuela, Sudan, and Lebanon are among the countries now experiencing a prolonged recession, with all three predicted to enter their fourth recession year in 2021. Argentina is predicted to grow again in 2021 after three years of recession, but that outlook is far from certain given the current coronavirus outbreak.
Other countries that have experienced recessions include the Democratic Republic of the Congo, one of Africa’s least developed countries, Syria, and Chad, a landlocked African country where agriculture provides a living for 85 percent of the people.
Data for the former Soviet and Yugoslav republics is only accessible from 1971 onwards. Nonetheless, Ukraine and Moldova are ranked 9th and 10th, respectively, out of 124 countries and territories, demonstrating the devastating impact of the demise of Communism. Ukraine had ten consecutive recession years between 1990 and 1999, whereas Moldova had nine. Only counting from 1971 onwards, Ukraine and Moldova would be ranked fourth and sixth, respectively, while Croatia would be ranked 12th.
Is the eurozone experiencing a downturn?
When the economy contracted in the preceding two quarters, the 19-nation bloc experienced a so-called double-dip recession. However, the eurozone is still 3% below its pre-pandemic level as of late 2019. After a spike in coronavirus infections in the winter, the region is on the mend.
What European countries are experiencing financial difficulties?
The debt crisis began in 2008 with the collapse of Iceland’s banking system, then extended to Portugal, Italy, Ireland, Greece, and Spain in 2009, prompting the coining of an insulting term (PIIGS). 1 It has resulted in a loss of faith in European companies and economies.
Is Europe in a downturn in 2021?
The growth rate released by the European Union’s statistics office Eurostat for the April-June quarter was 0.3 percent lower than in the first quarter of 2021, as eurozone countries experienced a double-dip recession after a comeback in mid-2020.
What were the countries hardest hit by the Great Recession?
The crisis had an impact on all countries in some form, but some countries were hit more than others. A picture of financial devastation emerges as currency depreciation, stock market declines, and government bond spreads rise. These three indicators, considered combined, convey the impact of the crisis since they show financial weakness. Ukraine, Argentina, and Jamaica are the countries most hit by the crisis, according to the Carnegie Endowment for International Peace’s International Economics Bulletin. Ireland, Russia, Mexico, Hungary, and the Baltic nations are among the other countries that have been severely affected. China, Japan, Brazil, India, Iran, Peru, and Australia, on the other hand, are “among the least affected.”
What went wrong during the eurozone crisis?
Since the end of 2009, the European debt crisis, often known as the eurozone crisis or the European sovereign debt crisis, has been a multi-year debt crisis in the European Union (EU). Several eurozone member states (Greece, Portugal, Ireland, Spain, and Cyprus) have been unable to repay or refinance their government debt or bail out over-indebted banks under national supervision without the help of third parties such as other eurozone countries, the European Central Bank (ECB), or the International Monetary Fund (IMF) (IMF).
A balance-of-payments crisis, or a sudden stoppage of foreign money into nations with large deficits and reliance on foreign credit, triggered the eurozone crisis. The inability of states to devalue their currencies exacerbated the situation (reductions in the value of the national currency). Prior to the adoption of the euro, macroeconomic variations among eurozone member states contributed to debt building in some eurozone members. The European Central Bank set an interest rate that encouraged Northern eurozone investors to lend to the South while encouraging the South to borrow since interest rates were so low. As a result, the South’s deficits grew over time, owing mostly to private economic actors. Unbalanced capital flows in the eurozone were exacerbated by a lack of fiscal policy coordination among eurozone member states, while a lack of financial regulatory centralization or harmonization among eurozone states, combined with a lack of credible commitments to provide bailouts to banks, encouraged risky financial transactions by banks. The specific causes of the crisis differed from one country to the next. As a result of banking system bailouts and government reactions to slowing economies post-bubble, private debts stemming from a property bubble were transferred to national debt in various countries. Concerns about the soundness of banking systems or sovereigns are adversely reinforcing because European banks possess a considerable amount of sovereign debt.
The crisis began in late 2009, when the Greek government revealed that its budget deficits were far greater than previously estimated. Greece requested foreign assistance in early 2010, and in May 2010 received an EUIMF bailout package. In early 2010, European nations implemented a series of financial support measures, including the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM). In late 2010, European nations implemented a series of financial support measures, including the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM). The ECB also aided in the resolution of the crisis by cutting interest rates and offering low-cost loans totaling over one trillion euros to keep money flowing across European banks. The ECB calmed financial markets on September 6, 2012, when it announced that all eurozone nations engaging in a sovereign state bailout/precautionary programme from the EFSF/ESM will get free unlimited support from the EFSF/ESM through certain yield-lowering Outright Monetary Transactions (OMT). Ireland and Portugal were given bailouts from the European Union and the International Monetary Fund (IMF). November 2010 and May 2011 were the dates, respectively. Greece received its second bailout in March 2012. In June 2012, both Spain and Cyprus received bailout deals.
In July 2014, Ireland and Portugal were allowed to exit their bailout programs due to improving economic growth and structural deficits. In 2014, both Greece and Cyprus were able to reclaim some market access. Spain was never formally part of a bailout program. The ESM’s bailout package was intended for a bank recapitalization fund and did not contain financial assistance for the government. The crisis has had severe negative economic and labor market consequences, with unemployment rates in Greece and Spain reaching 27%, and has been blamed for slowing economic growth not only in the eurozone but also across the European Union. It influenced ruling governments in ten of the eurozone’s 19 countries, influencing power transitions in Greece, Ireland, France, Italy, Portugal, Spain, Slovenia, Slovakia, Belgium, and the Netherlands, as well as beyond the eurozone in the United Kingdom.
Which EU country has the most powerful economy?
In 2020, Germany’s economy was by far the greatest in Europe, with a Gross Domestic Product of nearly 3.3 trillion Euros. The United Kingdom and France, which have similar economies, were the second and third largest economies in Europe this year, followed by Italy and Spain.
What is the size of the European Union?
The European Union (EU) is a 27-country economic and political union. It runs an internal (or single) market that lets products, capital, services, and people to move freely between member states.
How can the eurozone crisis be resolved?
Bailouts, quantitative easing, and lower interest rates were used to address the Eurozone crisis. Rich countries, such as Germany, originally backed austerity measures aimed at reducing debt levels.
Which nations are members of the EU but not the eurozone?
Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden are among the EU countries that do not use the euro as their currency.