Economy in recession. What happens in the economy after the recession?

The life cycle of business activity of any enterprise or economy of the whole state includes several stages. First, there is an ascent, then the work reaches its peak. Sooner or later, there is a decline, which can end in complete decline. The third stage preceding the crisis is predetermining. This stage is called a recession. Let's talk about it in the article.

Economic recession: general information

From the recession there are two ways out. The recession of the economy can lead, as was said above, to the complete decline of the country with all its consequences. The recession of activity can also be used by the government of the state to find solutions to actual problems that will allow us to enter a new growth cycle.

The concept of

The state of the economy, which often comes after raising all indicators and has a non-critical nature of the decline in production, is called a recession. During this period, there is a worsening of key indicators that affect macroeconomic indicators. The fact that the economy is in recession, testify:

1. Decrease in GDP.
2. Decrease in incomes of the population.
3. Deteriorating investment attractiveness.
4. Reducing the production of industrial enterprises.
5. Reduced consumer activity.

The economy in a state of recession means that an unfavorable period has come for the country. In the course of it, enterprises reduce production turnover, produce fewer goods, citizens receive cut back wages, which is why they start saving.

Causes

The economy in a recession may be due to:

1. The collapse of prices for gas and oil. Their decline leads to an economic recession in the states where these resources act as a key strategic product.
2. Active growth in the cost of raw materials. It can be triggered by increased consumer demand and agiotage.
3. Issue an unacceptable number of mortgage loans with a high percentage of risk.
4. Decrease in production volumes in all industries.
5. Decrease in salaries and other incomes of citizens. This entails, respectively, a deterioration in the purchasing power of the population.

What happens in the economy after the recession? The consequence of a recession inevitably becomes a depressed state or crisis. Under all economic laws, this state can not be avoided. However, thanks to the work of analysts and other specialists, the process can be significantly smoothened. The work of higher state minds will reduce the negative effect of recession, reduce the scale of consequences.

Sphere of distribution

If in any country the economy is in recession, then this can lead to negative consequences not only within this state. Currently, there is an active international cooperation. The economic activities of one country can have a close relationship with certain sectors in other countries. Thus, a decline in one subject will inevitably lead to a deterioration of the situation in another. This, in turn, can lead to a global world crisis. Thus, in particular, according to a number of analysts, the EU economy is in a deep recession. Within the framework of international relations, during the recession, there is a decline in indices on the exchange. As a result, the state currency of the country, in whose economy the deterioration is recorded, is depreciating. This, in turn, causes the probability of nonpayment of foreign debt. When the economy is in recession, the enterprises operating in the country mainly suffer. Before them there is a need to reduce production volumes due to inefficient consumption of goods. Untimely payments for the delivered products lead to the appearance of arrears in taxes and salaries. As a result, enterprises that are not ready for a crisis are considered insolvent (bankrupt). The impact of recession is felt strongly by immediate consumers of goods. The population receives lower wages, people become insolvent, can not fulfill credit obligations, get into debt pits.

Classification

When the economy is in recession, experts analyze the reasons for this situation. Based on this, the type of decline is determined:

1. Unplanned. Such a recession is caused by such negative factors as an unpredictable decline in world prices for strategic resources (oil and gas), the outbreak of war. As a result of these processes, a deficit is formed in the state budget, gross indicators begin to decline rapidly. Unplanned recession is considered by many experts the most dangerous. This is due to the inability to timely predict such a decline and, accordingly, response to it.
2. A recession that has a psychological or political character. The reason for this decline is the emerging distrust of foreign investors, local producers and the private consumer. This recession is manifested in a decrease in purchasing power, a decrease in the volume of financial receipts, a fall in the rates of bonds, shares, vouchers and other securities. Such a recession can easily be overcome. The exit of the economy from the recession in this case is carried out using the methods of financial and psychological impact.
3. The recession, which is caused by a decline in macro indicators and an increase in external debt. Consequences of such a recession are capital outflows, a decline in the value of shares, and a protracted long-term depression.

Period

A recession in the economy is recognized if the decline in production volumes and deterioration in gross indicators occurs for more than six months and begins to take a protracted character. The length of such a period will directly depend on the reasons that caused this situation. For example, if there is a recession of a political or psychological nature, then it is possible to reduce the duration of a recession due to the return of confidence of the population and businessmen. For this, loyal measures in the areas of lending and social security are applied. A different situation with an unplanned recession. As was said above, it is rather difficult to forecast such a decline. It depends on the negative factors of a global nature. The state, in which there is a decline in production, can not affect them. In this situation, the only thing that analysts can do is to develop measures aimed at maximum smoothing of negative effects.

Recession in Russia

The state of the domestic economy directly depends on the indicators of the oil and gas market. The rapid fall in prices for energy resources entails a number of negative consequences for the country. First of all, the volume of income that goes to the budget fund from the sale of strategic products is reduced. Stock indices start to fall, followed by a weakening of the ruble. The decline in production causes a decrease in the incomes of citizens. The consumer activity of the population is deteriorating. With a simultaneous decrease in incomes of citizens, prices for services and goods are growing. The economic recession in the country is conditioned also by external factors - sanctions of some countries of the world. Since 2015, relations with various international corporations have been severed, which jeopardized the functioning and development of large enterprises, had a very negative impact on GDP. As noted earlier by experts, this condition could last until 2017. However, today the situation may change if an agreement on freezing oil production starts to operate.

Recession and stagnation

These two concepts have significant differences. The recession is characterized as a moderate economic slowdown. At the same time, stagnation is characterized by a complete halt in key strategic sectors. In this period:

1. Trading and manufacturing companies stop work.
2. There is massive unemployment.
3. The incomes decrease, and the quality of life of the population worsens.

Conclusion

During the recession, the process of reformatting the country's economic regime is being launched. Experts develop and implement plans for the further development and rearmament of the main branches of the national economy. At the same time, stagnation does not provide for any positive dynamics and adaptation to the new reality. As a result, the country is living out the last stage of its cycle, a deep economic crisis begins.