OPEC, an acronym for the Organization of the Petroleum Exporting Countries, is an international governmental organization comprising 13
Will 2023 see an economic recession?
What is an economic recession?
What are the causes of economic recession?
• Excessive debt
When individuals and companies exceed debt loading limits, these behaviors can cause debt servicing costs to increase to the point where they cannot repay their financial dues. In some cases, it can even amount to default, increasing the likelihood of a major economic crisis.
An example of this type of excess debt, which exacerbated economic conditions, is what happened during the period known as the Great Recession and the global financial crisis in the period 2007-200 Bud, where this crisis began in the United States of America and its effects spread to the rest of the world, especially countries whose economies are directly linked to the American economy, such as European, Asian, Gulf and developing countries, This crisis has caused an increase in the accumulation of mortgage debt and negatively affected the housing sector, complicating financial and economic conditions around the world.
Inflation is the continuous upward trend of prices over time, and inflation itself is not a bad thing, but hyperinflation is a dangerous phenomenon, and central banks control inflation by raising interest rates in the meantime, rising interest rates limit economic activity due to high borrowing costs to establish new projects or expand existing ones.
Perhaps what we are witnessing today of hyperinflation is the largest in decades, which was caused by many events such as the repercussions of the Corona pandemic, the Russian-Ukrainian war and the concomitant energy and food crises, which led global central banks to raise interest rates to record levels unprecedented in a long time, one of the most important signs of the possibility of a global economic recession in 2023.\
• Financial downturn
While inflation may lead to the possibility of an economic recession, the recession that an economic downturn could cause is worse and more serious.
When prices fall over time, deflation occurs, and whenever wages fall, this leads to more price declines until deflation levels get out of control and people and institutions stop spending, undermining the economy, while central banks and economists lack the means to solve the problems that cause deflation, and Japan has experienced major conflicts with deflation in the nineties of the last century that led to a severe recession.