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What is the economic recession

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The term “recession” in Latin means “retreat.” About her start talking at a time when the decline in production is fixed for at least six months. By the way, it is to the economy is much more dangerous than stagnation (when key economic indicators simply freeze in place). In other words.
What is the economic recession?
 

What is the economic recession

The term “recession” in Latin means “retreat.” About her start talking at a time when the decline in production is fixed for at least six months. By the way, it is to the economy is much more dangerous than stagnation (when key economic indicators simply freeze in place).

In other words, a recession – a pullback of the economy of any country back (goods and services produced and sold less than before). In numbers, this translates into a decline in GDP. During this period, rising unemployment, declining investment, worsening the overall standard of living and falling financial indices.

The causes of this process can be divided into external and internal.

External traditionally carry serious force majeure (war, natural disasters, revolutions). The economy of agrarian countries can also seriously affect climate change (for example, a severe drought several years in a row).

Internal reasons – this is when a certain economic system has accumulated too many fundamental inconsistencies.

For example, the last global recession of 2008-2009. It began with an internal mortgage crisis in the United States. At that moment, a huge amount of issued mortgages has led to an increase in defaults and deterioration in the banking system. From the real estate crisis spread to the real sector, which caused a collapse of quotations on world markets.

After the bankruptcy of major US investment there was a sharp increase in interbank lending rates. As a result, the crisis has spread around the world and caused a widespread decline in production, a surge in unemployment and decline in commodity prices.

According to their forecasts in 2015 GDP will shrink by 1.3%, in 2016 – by 1% in 2017 – 0.5%. Expect a minimum of economic recovery is only in 2018.

On the industrial boom and inflow of investments in the coming years, too, have to forget. According to analysts, in the three years of the country’s “escape” for about 250 billion. Dollars.

What will affect the situation in the current year?

The price of oil

It is unlikely that this year the price of oil will rise significantly. OPEC to reduce production volume is going. The greatest potential for increasing production now Saudi Arabia, Iraq and Libya.

The United States has enough strategic reserves, of which the country can sell in the coming years, to temporarily “freeze” in this program to develop new fields.

The optimists promise that the “black gold” will cost about $ 75 per barrel, the pessimists are predicting a drop to $ 30.

Foreign policy

How bad is it? The fact that the country’s economy on the brink of default easiest way to pull through external loans. In our case, rely on the “helping hand” in the form of cheap loans from the West do not have to – sanctions, we firmly cut off from international capital markets.

Investment Climate

However, domestic investors are afraid to invest because of the lack of guarantees for the protection of private property. Foreign investors also do not like the situation of uncertainty in which today turned out to be our country.

Structural reforms

Leading domestic economists believe that without structural reforms economy and politics of the country out of the crisis will not be able.

In the near future it is necessary, at least, to abandon the rigid centralization of control, reduce corruption, provide more freedom to small and medium businesses, to diversify the economy, improve the investment climate.

Unfortunately, there are no prerequisites to the fact that this year the government will take steps in this direction. On the contrary, all the recent statements by the authorities indicate otherwise.

State support will be given systemically important banks and private companies. To “extinguish” the liquidity deficit with frightening ease expended reserves of the country: the National Welfare Fund, the Reserve Fund, foreign exchange reserves. Maximum slashed social spending articles while increasing the tax burden on business.

reminiscent of the borrower, the remaining without a job, with lots of debt and without the slightest hope of outside help. At the same time, instead of to pull myself together and start searching for a new job, he just “eats” their savings and making new debts.

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