The behavior of the main macroeconomic and financial variables displays a number of regularities during the four global recessions. The 2009 global recession, which saw by far the largest declines in many indicators of activity, otherwise followed a pattern broadly similar to the previous episodes. The impact of global recessions often varied across different groups of countries and regions. 

Sharp contraction in real activity. In the four global recessions, per capita global output (market exchange rate weighted) declined on average by 1.3 percent, which is 3.5 percentage points below the average annual growth rate of 2.2 percent during the 19502019 non-recession years (Table 3). With PPP weights, the decline in per capita output during global recessions was, on average, 0.8 percent, while growth during expansion years was 2.5 percent. 

Table 3. Main features of global recessions

  Global recessions Non-
recessions 		Global downturns All years
1975.0 1982.0 1991.0 2009 Average
Activity
Output 1.1 0.4 1.3 -1.8 0.3 3.9 2.3 3.7
Output per capita -0.7 -1.3 -0.3 -2.9 -1.3 2.2 0.8 2.0
Industrial production -7.4 -2.2 -0.1 -8.9 -4.6 4.0 0.3 3.5
Trade -1.4 -1.8 3.2 -10.4 -2.6 6.3 2.2 5.8
Unemployment rate 1.6 0.3 0.4 0.8 0.8 0.0 0.2 0.1
Oil consumption -0.8 -2.7 0.2 -1.0 -1.1 2.5 0.9 2.3
Investment 0.7 -1.1 -1.0 -5.0 -1.6 4.7 2.0 4.4
Consumption 2.6 1.6 1.9 -0.1 1.5 3.7 2.7 3.6
Output (PPP) 1.8 0.6 1.5 -0.5 0.8 4.2 2.7 4.0
Output per capita (PPP) -0.1 -1.1 -0.1 -1.7 -0.8 2.5 1.2 2.3
Financial markets
Capital flows -1.6 -2.3 -3.2 -4.5 -2.9 0.5 -3.8 0.2
Credit 0.2 3.2 2.2 3.4 2.2 5.4 3.8 5.2
Equity prices -4.8 -10.9 -1.7 -13.5 -7.7 6.2 -2.9 5.3
House prices -4.3 -3.1 -0.2 -2.5 -2.5 2.2 1.5 1.8
Financial conditions ... -0.2 -0.1 0.3 0.0 0.1 0.2 0.1
Inflation -2.8 -2.5 0.2 -3.6 -2.2 0.2 -0.2 0.0
Interest rates, confidence, and uncertainty
Nominal interest rate -2.5 -1.6 -1.0 -1.9 -1.8 0.1 -0.4 0.0
Real interest rate 0.9 1.1 -0.4 0.7 0.6 -0.1 0.1 0.0
Business confidence -1.3 -0.6 -0.5 -0.8 -0.8 0.1 -0.7 0.0
Policy uncertainty     4.2 14.0 9.1 3.4 31.3 3.8
Policies
Government expenditure 9.2 2.3 3.4 8.7 5.9 4.7 4.8 4.8
Poficy ratc -2.3 -1.0 -1.2 -1.9 -1.6 0.1 -0.6 0.0

Among the four global recessions, the 2009 episode was by far the deepest. It involved the only annual contraction in real global GDP since 1950.  The least severe episode in terms of per capita output growth was the 1991 recession. The average annual growth of output over the four global recession episodes was 0.3 percent, about 3.6 percentage points lower than average world growth during expansion years (3.9 percent). 

World per capita output, industrial production, trade, and oil consumption often started to slow down two years before the global recessions (Figure 8.A). Moreover, investment, industrial production, and trade typically declined much more than output during the global recessions. While private consumption generally held up relatively well, its growth was much weaker than in non-recession years. Oil consumption declined in every global recession except for the 1991 episode.  

Figure 8.A. Economic activity during global recessions 


Depressed financial markets and business confidence. Asset prices and credit on average began decelerating about two years ahead of each global recession (Figure 8.B). The average annual rate of credit growth during the global recessions was about two-fifths of the annual average observed in non-recession years, while both house and equity prices fell, with the decline in the former on average three times larger than the latter. Financial conditions often tightened before the global recessions but then quickly loosened as monetary policy became accommodative. Inflation typically fell during global recessions, which gave further license for central banks to reduce interest rates (Figure 8.C). 

Figure 8.B. Financial markets during global recessions 


Figure 8.C. Interest rates, confidence, and uncertainty during global recessions 


The behavior of real interest rates varied widely across the episodes. For example, real rates declined in the 1991 and 2009 episodes, but went up during the 1975 and 1982 recessions. Business confidence fell in all global recession episodes. Economic policy uncertainty increased during the two episodes – 1991 and 2009 – for which data are available. 

Differences across country groups. The impact of global recessions has varied across different groups of countries and regions (Table 4). In advanced economies, average per capita growth fell to -1.1 percent during the global recession years, from 2.7 percent during non-recession years. In EMDEs, the decline was to 0.2 percent from 3 percent (LICs on average suffered larger declines in per capita growth than other EMDEs). Thus, the drop in growth was 1 percentage point greater for the advanced economies than for the EMDEs. In addition, both trade and industrial production registered much larger contractions in advanced economies than EMDEs. 

Some EMDE regions have been able to weather global recessions better than others. For example, the EAP and SAR regions continued expanding during the past four global recessions whereas the other four regions all on average experienced declines in per capita output (though aggregate output continued growing, on average, in LAC and SSA). One explanation for this outcome is that while EAP and SAR mostly comprise relatively fast-growing commodity importers (including the large economies of China in EAP and India in SAR), the other four regions consist more of commodity exporters that have been severely affected by the collapses in demand for commodities associated with global recessions.  

The 2009 recession. The unusually sharp declines in a wide range of economic indicators, especially growth in both aggregate and per capita global output, highlight the severity of the 2009 global recession. The global impact was amplified by the growing importance of international linkages through trade and financial flows. While the globalization of national manufacturing chains was a major force driving the growth of world trade in the two decades prior to the global recession, it appears to have been instrumental in driving the sharp contraction of cross-border trade during 2009.  The 2009 episode also saw the largest increase in the index of global policy uncertainty, and the second sharpest decline in business confidence (the largest decline took place during the 1975 global recession). 

Global capital flows registered their sharpest fall during the 2009 global recession. After overshadowing the growth of global trade flows over the previous two decades, global capital flows had reached unprecedented levels in 2007. But they rapidly dried up in the last quarter of 2008, as the global financial crisis spread from advanced economies to EMDEs. Variations among countries in the decline of capital flows appear to have been related to the degrees of trade and financial openness, the nature of financial linkages (e.g., reliance on bank flows), and domestic macroeconomic conditions.  

As the epicenter of the financial crisis, advanced economies felt its brunt the most (Figure 8.D; Table 4). Almost all of them experienced much larger declines in output than in the previous global recessions, and on average their per capita output growth declined to -4 percent in 2009, more than 6 percentage points below their average growth rate during non-recession years. Contractions in trade, industrial production, and employment were also much sharper in these economies than in EMDEs. 

Figure 8.D. Economic activity during global recessions, by country group 


Table 4. Main features of global recessions (by country group) 

  Global recessions Non-
recessions 		Global downturns All years
1975 1982 1991 2009 Average
Advanced economics 
Output 0.2 0.3 1.3 -3.4 -0.4 3.5 1.8 3.3
Output per capita -0.7 -0.3 0.6 -4.0 -1.1 2.7 1.0 2.4
Industrial production -7.8 -2.5 -0.2 -12.4 -5.7 3.6 -0.3 3.0
Trade -4.7 -0.1 3.7 -11.1 -3.1 6.4 1.7 5.9
Uncmpbymcnt rate 1.5 1.3 0.6 2.2 1.4 -0.1 0.0 0.0
Output (PPP) 0.2 0.3 1.3 -3.3 -0.4 3.5 1.7 3.3
Output per capita (PPP) -0.7 -0.4 0.6 -3.9 -1.1 2.7 1.0 2.5
Credit 0.2 3.1 2.0 0.9 1.6 4.9 3.0 4.7
Government expenditure 8.6 3.5 3.6 7.3 5.7 4.2 3.5 4.2
Policy ratc -2.4 -1.2 -1.4 -2.0 -1.7 0.1 -0.7 0.0
EMDEs
Output 4.2 0.9 1.5 1.8 2.1 4.9 4.0 4.7
Output per capita 2.0 -1.2 -0.4 0.4 0.2 3.0 2.4 2.8
Industrial production   ... 0.4 -0.2 0.1 5.4 3.1 5.0
Trade 5.3 -5.1 2.0 -9.0 -1.7 6.1 3.8 5.6
Unemployment rate ... -0.2 0.3 0.4 0.2 0.0 0.2 0.0
Output (PPP) 4.2 1.1 1.9 2.3 2.4 4.9 4.2 4.8
Output per capita (PPP) 2.1 -0.9 0.0 0.9 0.5 3.0 2.5 2.9
Credit -0.7 4.5 5.7 17.7 6.8 7.9 9.8 7.8
Government expenditure 16.0 -6.2 2.7 11.7 6.0 5.8 6.5 5.8
Policy rate 0.1 1.5 0.2 -2.0 0.0 0.0 0.4 0.0
LICs
Output 0.1 1.0 -0.5 5.9 1.6 3.9 3.6 3.8
Output per capita -2.3 -1.6 -3.3 3.0 -1.1 1.3 0.9 1.1
Trade 3.6 -5.6 -1.4 4.6 0.3 6.4 7.5 6.0
Output (PPP) 0.5 0.9 -0.2 5.0 1.6 4.0 3.6 3.9
Output per capita (PPP) -1.9 -1.7 -3.1 2.1 -1.2 1.4 1.0 1.2

In contrast, EMDE output growth remained positive, although it did slow sharply, from 8.2 percent in 2007 to 5.7 percent in 2008 and 1.8 percent in 2009. EMDEs delivered their strongest recovery following the 2009 episode, as discussed below. LICs were also able to continue growing during the 2009 global recession whereas their growth fell to negative rates in per capita terms in the previous episodes. 

In the 2009 episode, there were some stark differences across EMDE regions (Figure 8.D; Table 5). ECA took the largest hit partly because the withdrawal of Western European banks caused a severe credit crunch, and the region's per capita output declined by more than 5 percent in 2009. Per capita output in LAC and the Middle East and North Africa (MNA) also contracted as commodity prices and exports collapsed. In EAP and SAR, expansions continued, partly reflecting heavy use of monetary and fiscal stimulus in the largest economies to support activity. Unlike the previous global recessions, when SSA experienced declines in per capita output, the region was able to avoid recession in 2009 partly because it had limited exposure to global financial markets but stronger linkages, especially through trade, with the large emerging market economies of EAP, which continued growing.

Table 5. Main features of global recessions (by region) 

  Global recessions Non- recessions Global downturns Al years
  1975 1982 1991 2009 Average
East Asia and Patine
Output 6.6 6.3 8.3 7.5 7.2 7 6.7 7
Output per capita 4.4 4.6 6.7 6.7 5.6 5.4 5.4 5.4
Industrial production ... ... 11.1 8 9.5 9.9 6.3 9.9
Trade 0.2 -2.1 16.6 -6.4 2.1 9 4 8.6
Output (PPP) 6.4 6 8.2 7.3 7 6.9 6.2 6.9
Output per capita (PPP) 4.3 4.3 6.6 6.5 5.4 5.3 5 5.3
Europe and Central Asia
Output 6.2 3 -5.8 -5.1 -0.4 3.5 1.5 3.2
Output per capita 5.3 2.1 -6.2 -5.4 -1 2.9 1.3 2.6
Industrial production ... ... ... -8.7 -8.7 3.8 1.3 3.3
Trade 8.5 -1.5 -17.1 -14.3 -6.1 5.8 3 5
Output (PPP) 6.2 3.1 -5.9 -5.4 -0.5 3.4 1.4 3.2
Output per capita (PPP) 5.2 2.2 -6.3 -5.6 -1.1 2.8 1.3 2.6
Latin America and the Caribbean
Output 3.8 -0.6 3.3 -1.8 1.2 4.1 26 3.9
Output per capita IA -2.8 1.4 -2.9 -0.7 2 0.8 1.8
Industrial production   ... 0.3 -6.5 -3.1 2.1 4 1.7
Trade -1.7 -10.4 11.2 -10.9 -3 6 2.5 5.5
Output (PPP) 3.7 -0.8 3.6 -2 1.2 4 2.6 3.8
Output per capita (PPP) 1.3 -2.9 1.7 -3.1 -0.8 1.9 0.8 1.8
Middle East and North Africa
Output -1.3 -6.4 6.9 0.5 -0.1 5.3 5 5
Output per capita -4 -9.5 4.4 -1.6 -2.7 2.7 28 2.4
Industrial production ... ... ... ...   ... ... ...
Trade 5 -7.3 13.4 -7 1 5.4 7.5 5.1
Output (PPP) -0.5 -5.1 7.2 0.4 0.5 5.2 4.7 4.9
Output per capita (PPP) -3.2 -8.2 4.7 -1.7 -2.1 27 2.6 2.4
South Asia
Output 7.5 3.8 23 4.8 4.6 5 5.3 5
Output per capita 5 1.3 0.1 3.3 2.4 3 3.5 3
Industrial production ... ... ... ... .• • ...   ...
Trade 6.7 5.3 7.4 -6.5 3.2 6.9 4.8 6.6
Output (PPP) 7.6 3.9 2.3 4.7 4.6 5 5.3 5
Output per capia (PPP) 5.1 1.4 0.1 3.2 2.5 3 3.4 3
Sub-Saharan Africa
Output 0.3 0.3 0.2 3.2 1 4 3.7 3.8
Output per capita -2.3 -2.6 -26 0.4 -1.8 1.2 1 1.1
Industrial production ... ... ... ... ... ... ... ...
Trade 6.4 -10.3 4.5 -9.9 -2.3 4.7 2.7 4.3
Output (PPP) 0.3 0.4 0.3 3.6 1.1 4 3.8 3.9
Output per capita (PPP) -2.4 -2.5 -2.6 0.8 -1.6 1.3 1.1 1.1