World Economic Crisis Overview

The world economic crisis is a situation in which countries all over the world face with a sharp economic slowdown caused by a financial crisis. The states experiencing economic disaster are likely to deal with falling GPD and inflation. 

In addition, the economic crisis can take the form of depression or regression. Both of them are characterized by a high unemployment level, possible reduction of purchasing power and lack of confidence in the future.

GDP rate change of world biggest economies

Is Another Global Financial Crisis Coming?

Consider that our civilization has already survived several global economic crises and the latest one happened in 2008. Although there were signs warning about that disaster, the precautionary measures weren’t taken.

And right now the majority of world-known financial analysts inform that the new global crisis is on the way. What is more, they say that there are obvious signals of the future world-spanning regression.

1. COVID-19

The coronavirus pandemic has affected almost every industry. According to the words of Brian Pearce, the transportation industry may lose near $63 billion due to COVID-19. This is roughly 11% of global revenue.

At the same time, if things will get worse, the losses may grow up to $133 billion. And, of course, the pandemic affected other industries resulting in substantial loss of funds that may lead to the world financial crisis.

What is more, the majority of the EU economies start feeling the impact of COVID-19. The list includes such countries as Italy, France and Spain. During the UN Conference on Trade and Development, the specialists announced the virus would cause the economic meltdown costing the global economy as much as $2 trillion.

2. Growth of Fear Index

On the 12th of March the VIX or so-called “the fear index” has reached its highest point since the last financial crisis. It catalyzed a sharp drop in equities, cryptocurrencies, commodities and even gold. Take into account that during the global economic crisis of 2008 gold was also declining at the early stages of the crisis and gained a downward moment as the situation worsened.

3. Oil Price War Between Russia and Saudi Arabia

Recently Saudi Arabia has initiated a price war with Russia. The conflict led to a slump in oil prices. They have already fallen by 30% since the start of the year. Moreover, the analysts claim that the oil price war is one of the main causes of the ongoing global stock market crash that may lead to the world crisis.

Unfortunately, there are other warning signals of the upcoming catastrophe including the US-China trade war, India’s GDP slowdown, slowing US growth and falling retail sales in America. All these factors have caused the current crisis in the world.

Unemployment rate for developed countries

Central bank rates for developed countries

Consequences of the Economic Crisis

Probably, we will face with the consequences of the regression soon. However, due to the experience gained in 2008, it’s possible to predict what problems we should expect in the nearest future.

1. Unemployment

A high unemployment level was one of the most notable consequences of the world economic crash in 2008. While some countries managed to cope with this problem without great difficulties, it took a lot of time for others to stabilize the situation.

For example, the statistics show that the US national unemployment rate rose from 5% to 10% in October 2009. At the same time, more than three thousand workers suffered from the mass layoffs in February of 2009. And even in 2010, the unemployment rate was still above 9%.

2. Closure of enterprises

Additionally, due to the crisis in the world, more than three million American households were foreclosed. The same problems occurred not only in the US but also in European countries. For example, in the UK almost 300 thousand businesses went burst in 2008 and near 500 thousand enterprises turned bankrupt in 2009.

3. Fall of GDP

The reports of the Federal Reserve inform that GDP declined by 4.3% from a high in the Q4 of 2007 to its low in the Q2 of 2009. What is more, the UK GDP shrank by more than 6% between 2008 and 2009. The country’s economy took almost five years to get back to the size it was before the world economy collapse.

Conclusion

As you can see the upcoming crisis around the world is a serious problem for the citizens of every country. Anyone can experience financial woes during this difficult period. Besides, a lot of enterprises may become out of business and many people will lose their jobs. 

At the same time, we should keep our heads up because experts have already come up with the ideas of the best responses to the crisis. With the help of interest rates and income tax cuts as well as higher unemployment and sickness benefits, the global economy stands a good chance to survive the upcoming collapse.

Recent news on world financial crisis