What is Recession? What Happens If a Country Goes into Recession? admin, March 17, 2024 ‘Recession’, which you may frequently encounter in economic news, or ‘technical recession’, as it is more popularly known in recent times, is one of the situations that cause long-term and permanent damage to economies. Even so; Sometimes it can take years to recover from the effects of a recession. Recession, a macro concept in the economic literature, is generally an indicator that things are not going well in growth-oriented economies. Recession, which is one of the outcomes of the global economy that has constantly fluctuated and deteriorated in recent years due to the effects of pandemics, wars, political and regional crises, is a concept that financial markets follow closely. So, what does recession, which has become as popular as the concept of ‘inflation’, mean? How to understand that a country is in recession? Let’s take a look together. What is Recession? The word originates from the Turkish word ‘recession’, which means stagnation in English. Recession means a continuous contraction in the economies of countries or communities such as the European Union.recessionmeans that a country’s economy has shrunk for at least two consecutive quarters (6 months). This manifests itself as a decline in the indicator known as gross domestic product (GDP), which shows the value of all goods and services produced by a country over a certain period of time. Symptoms of Recession Fall in GDP: As mentioned above, the most basic indicator of a recession is a decline in GDP for two consecutive quarters. Increasing unemployment: Economic contraction leads to downsizing of businesses and layoffs. This causes an increase in the unemployment rate. Falling investments: Economic uncertainty also negatively affects investments. Reduced investments also weaken future economic growth. Decreasing revenues: Economic contraction and unemployment also cause incomes to decrease. This also reduces consumption expenditures. Falling consumption expenditures: Consumers reducing their spending further deepens the economic recession. Recession Overview The basis for measuring recession is the contraction of gross domestic product, defined as growth, for two consecutive quarters. These quarterly growth performances are generally evaluated compared to the previous quarter. Regardless of how it is evaluated, in its simplest form, it is the name given to the syndrome of economies not being able to grow. In academic jargon, recession; These are the periods when economic activities decline, unemployment rates increase, and as a result, the gross domestic product of the countries decreases. Since gross domestic product is related to the country’s production capacity, decreases in production bring about employment losses and an increase in unemployment. As income decreases after increasing unemployment, expenditures decrease, and falling expenditures also reduce investments. With a snowball effect, the economy accelerates towards a halt. In some periods, high inflation is also observed along with economic stagnation. This situation is explained as stagflation in the economic literature. However, the characteristics of each country and region; In fact, since the dynamics of the same country in different periods will be different, it may produce unique results depending on the country or period. In some countries, inflation (price increases) may occur during this process, while in some countries, price decreases (deflation) may occur. Although there are some differences in their effects, the certain thing is that production decreases and economies shrink. What is a Technical Recession? While the situation regarding the recession is still a matter of debate in economic circles, it can be observed that the effects of recession are experienced in some countries while the growth performance continues. In contrast to this situation; While a country shrinks due to periodic crises, financial and political problems, it may not experience these effects. To avoid such question marks, the concept of ‘technical recession’ is used. The term ‘technical recession’ is used when quarterly GDP data in any country shows a contraction for the second consecutive quarter. How Does Recession Affect Financial Markets? In this process, the most obvious features are the shrinking of economies and loss of income due to increasing unemployment. Since falling incomes will affect savings, investors’ appetite will decrease. In this case, it causes declines in stock markets. Again, possible balance sheet deteriorations caused by declines in production of companies issuing shares also create downward pressure on stock markets. The value of investment instruments that reduce risk may increase during recessionary periods with increasing uncertainty. Demand for instruments such as gold and bonds increases. Finance