5 Countries With the Worst Recession of 2020 . Hello, before Mimin, discuss which countries will experience recession in 2020. Mimin will give you some information first about what a recession is, its effects and the reasons why an economic recession can occur .
During the Covid-19 pandemic, many countries are preparing to tackle an economic recession. An economic recession is characterized by a significant and prolonged decline in economic activity.
If an economic recession cannot be resolved immediately, then people are worried that the recession will last longer, causing an economic downturn or recession. In addition, if a country experiences an economic crisis that has already experienced recession, it will be difficult for its economy to recover. The following are the factors that contribute to an economic recession:
- Imbalance between production and consumption
The balance between production and consumption or people’s purchasing power is the basis for economic growth. However, if production and consumption are not balanced, problems will arise in the economic cycle. If high production is not accompanied by high purchasing power, it will result in an accumulation of commodity stocks. Conversely, if public demand is not fulfilled due to low output while people’s purchasing power is high, then the country must import. This has led to a decline in corporate profits and a weak capital market.
- Slow economic growth
Global economic growth is also used as a criterion for a strong economy. on the contrary, the development http://220.127.116.11/ of gross income is very influential for the country, which is generated by food, the state budget, savings and shipping of goods outside the country minus imports. If the gross domestic product has decreased for a long time, it can be concluded that a country’s economic growth is weakening or experiencing a recession.
- High deflation
For one thing, inflation is needed for economic growth to be sustainable. However, high inflation will actually complicate the state of a country’s economy. As a result of soaring commodity prices, people’s purchasing power is inaccessible, especially for the lower middle class. If people’s purchasing power decreases, this situation will worsen, causing deflation. The sharp fall in commodity prices has also affected company revenues and profits. As a result, production costs cannot be paid and output is reduced.
- High unemployment rate
Workers are one of the important factors in economic development. If a country cannot provide employment for its local workers, the unemployment rate will be high and people’s purchasing power will be low, which will trigger criminals to make a living.
- Loss of investor confidence
To make the economy better off, a country must be able to create a favorable investment environment for security or strategic projects. This is done to attract investors. However, if economic growth declines, investor confidence will be lost, which can have an impact on the development of money circulation, weak business, and PT minimizing production.
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Not only will it have an impact on the country’s economy, but the problem of economic recession will certainly have a serious impact on society. In the event of an economic recession, the impacts that will be felt by the community include:
- Number of layoffs (layoffs)
In the case of an economic recession, the most obvious impact is the number of layoffs in various regions. This was due to the economic slowdown which led to the closure of several companies and cessation of operations which resulted in a decrease in sales and company revenues.
- An investment tool under threat
Community activity in financial markets can also be affected by economic recession. As a result of an economic recession, due to a decrease in the value of assets such as a company’s investment portfolio or stocks, an economic recession will affect investment tools.
If there is an economic downturn, people must use the income earned by not spending money on things that are not really needed. Some techniques to minimize the impact of an economic recession can be implemented by the community, namely by assigning financial assets to low-risk instruments. This is like moving investment from the financial sector to gold bullion.
- Reducing people’s purchasing power
Industry players, especially MSMEs, can also feel other impacts. Because if a recession occurs, people’s purchasing power will decrease and people are more willing to maintain their financial condition.
Although deflation is good for society, it will hurt the economy and cause massive unemployment. Currently, many MSME players have felt the impact of the decline in people’s purchasing power for their products due to the Covid-19 pandemic. Let’s look at the 5 countries with the heaviest recession in 2020:
- United States of America
After Singapore and South Korea, the United States officially went into recession. Uncle Sam’s economic growth rate in the second quarter was -32.9%. The Institute of Economic and Financial Development (Indef) encourages the Indonesian government to immediately implement extraordinary stimulus measures.
Previously, the US economy contracted -4.8% in the first quarter. Regional quarantine or lockdown policies from March to June have led to significant declines in household consumption, exports, production, investment and spending by local and state governments. This puts pressure on the US gross domestic product (GDP).
Researcher Indef Bhima Yudhistira Adhinegara said the US economic recession will definitely have an impact on the national economy. Bhima told Jawa Pos yesterday: “If every 1% of economic growth in the United States is revised, it will affect Indonesia’s economic growth from 0.02% to 0.05%.” The impact of the US economic recession will also affect investor confidence in investing in high-risk assets such as stocks. Investors will pay more attention to safe-haven assets. Like gold and government bonds. In the past week, net sales (net sales) of Indonesian shares increased by Rp 1.86 trillion. Selling even continues. In addition, Indonesia as the main trading partner of the United States will have an impact on the decline in export performance. The economic recession has reduced the purchasing power of consumers. Even though, demand for export commodities such as textiles, clothing, wood products and footwear has decreased. Especially in the second semester of the second semester of 2020.
Bhima encouraged the government to look for alternative export markets whose economy is not as bad as the United States. For example, China experienced actual growth of 3.2% in the second quarter. An alumnus of Gadjah Mada University said: “This means that China’s demand for Indonesian products can recover faster than the United States.”
After the corona virus crisis, the German economy shrank sharply in 2020. The budget deficit reached 4.8%, but the economic situation is still better than other major European countries.
According to data released by the German Federal Statistical Office (Destatis) on Thursday (14/1), the figure fell sharply by 5% last year. In 2019, the German economy still grew 0.6%. The various restrictions and blockades during the corona pandemic will deal a heavy blow to the national economy in 2020.
Destadis President Georg Thiel said in announcing the latest statistics on Germany’s gross domestic product (GDP): “The global pandemic has plunged the German economy into a severe recession, ending 10 years of growth.” Economic analysts had previously predicted that the economy will shrink by more than 5.1%, but De Static’s forecast is becoming more optimistic. However, Katharina Utermoehl, an economic analyst at the Allianz Group, warned that Germany will still have difficult months.
He said: “The economy’s up and down journey like a jet plane can continue. “The German economy will experience a sharp setback in early 2021,” he said. Destatis reported that German exports fell by about 10% last year, imports fell 8.6%, and household consumption fell 6%. Corporate investment has also plummeted, with construction and government spending the only bright spots.
However, Albert Braakmann, head of Destatis’s National Accounts Department, said. “The German economy coped with the crisis better than many other countries.” Indeed, the economic contraction in 2020 was smaller than the 5.7% decline in 2009 at the height of the global financial crisis.
In particular, the manufacturing sector has largely offset a decline in the service industry, where industrial firms have recovered strongly from blockades imposed in March and April, when much of the economy stagnated.
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INSEE, France’s statistical office, said that due to the impact of the quarantine (blockade) implemented during the corona pandemic, the country’s economic growth contracted or minus 13.8% in the second quarter of 2020. As a result, French economic growth shrank in the last three quarters.
Seasonally adjusted gross domestic product (GDP) fell better than expected, but worse than other European economies.
Agence France-Presse quoted Friday (31/7) as saying: “Negative GDP growth in the first half of 2020 was due to the suspension of ‘unnecessary’ activities during the lock-in period from mid-March to early May.” When the lock was just implemented, INSEE also updated its first quarter figure, which was down 5.9% from the previous estimate of negative 5.3%.
This achievement in the second quarter of 2020 shows that France has contracted for three consecutive quarters and is on the brink of recession.
In the second quarter of 2020, French economic contraction was much greater than that of other European countries, for example Germany was negative 10.1%, Austria 10.7%, and Belgium negative 12.2%. However, the decline was better than INSEE’s estimate since mid-June, which contracted 17%. At the same time, the French Central Bank expects a decline of 14% in early July. Analyst agreement used by Factset fell 15.3% of GDP.
Italy is one of the European countries hardest hit by the coronavirus. The eighth largest economy in the world is believed to be in recession.
Italy imposes restrictions on public places until April 3. They have restricted travel abroad of its 60 million inhabitants, banned public events, and closed schools, cinemas, museums and stadiums. In fact, Italy imposes restrictions on the opening hours of restaurants, bars and shops.
According to a CNN report on Thursday (2020/3/2020), the proportion of the population infected with the corona virus in Italy is more than double that of China. According to records, the number of positive corona cases in Italy was 9,000 people and the death toll was 463 people. In general, these restrictive measures have contributed to the economic slowdown in Italy, especially in the fourth quarter of 2019 in line with the economic contraction of the Pisa countries.
Jack Allen-Reynolds, senior Europe economist at Capital Economics, believes the Italian economy will contract sharply in the first half of this year. In fact, even if the restrictions are lifted at the end of April, Italy’s GDP will fall by about 2%.
It said the impact of expanding public restrictions would be even greater. On the other hand, the supply chain of raw materials in Italy is also said to be disrupted. “If the virus breaks out in Germany and other major trading partners, it could disrupt supply chains,”
Goldman Sachs (Goldman Sachs) economists also estimate that these public restrictions could reduce Italy’s economic growth in the first half of this year by 1.5 percentage points.
The research report quoted him as saying: “Although fiscal policy will overcome some obstacles, a viral outbreak is likely to propel Italy into recession.” In Italy, the industries hardest hit by the virus are transportation, arts and entertainment, retail, and hotels and restaurants. In fact, this sector accounts for about 23% of Italy’s GDP.
The business world has also reacted to a virus that is increasingly prevalent. Fiat Chrysler (FCAU) announced it would temporarily close four factories in Italy to reduce production. A PT advisor said this was aimed at preventing the spread of the virus.
Mall like Esseelunga also uses the distance between buyers in the shop. According to existing regulations, it is imperative to maintain a minimum distance of 1/2 to one M for all visitors.
Stefano Manzocchi, chief economist at Confindustria, said these public restrictions could put the catering and tourism industries into crisis. With the popular destinations of Venice and Rome empty, Italy’s tourism industry will be hit hard. The Vatican itself closed St. Peter’s Square and St. Peter’s Basilica to tourists.
Stefano said: “Limitations of action and concerns about what’s to come could cause consumption to shrink, and these contractions may last a very long time. He hopes that the government will provide a broader deferment of debt payments, liquidity support for Italian companies, subsidies for temporary unemployment, and public infrastructure investment plans.
Stefano said: “Of course, this will not increase demand, but it will help maintain spending on staples and provide grace periods for certain taxes and loan payments.”
The Italian Ministry of Economy has indicated to the government that the mortgage loan will be suspended. This step is being discussed in collaboration with the bank. In addition, the Italian government will allocate 28 billion US dollars to overcome the crisis caused by the corona virus.
Researchers at Barclays Bank predict that European countries will experience a brief but relatively deep recession in the first half of this year. They estimate an annual economic growth rate of 0.3%.
- South Korea
South Korea officially entered recession in the second quarter, marking the country’s worst economic slowdown in more than two decades. Exports fell sharply due to the corona virus pandemic crisis.
The Antara News Agency reported on Thursday (23/7/2020) Bank of Korea that the country’s ginseng economy shrank by 3.3% after a seasonal adjustment in June compared to the previous three months.
This figure represents the largest contraction since the first quarter of 1998. Asia’s fourth largest economy follows Japan, Thailand and Singapore, and they have either experienced a technical recession or economic downturn for two consecutive quarters.
Even so, South Korean analysts and policymakers say it is working to enable a faster and faster economic recovery than other countries in the region.
Responding to the economic recession data, South Korean Finance Minister Hong Nam-ki said: “When the pandemic slows down, overseas production activities, schools and hospitals are back on track, we may recover like China in the third quarter.”
He said China’s economy, after experiencing a sharp decline in the first quarter, returned to growth in the second quarter because it was the center of the initial coronavirus outbreak. South Korea’s gross domestic product (GDP) fell 2.9% year-on-year, the biggest decline since the fourth quarter of 1998.
According to the Al Jazeera report, export activities accounted for nearly 40% of economic growth, and it was the sector with the largest growth rate, with a quarterly decline of 16.6%, the lowest level since 1963.
So far, the government has provided an economic stimulus of around 277 trillion won (equivalent to 3,374 trillion rupiah). However, policymakers do not have sufficient capacity to control global demand for domestic exports. HI Investment & Securities analyst Park Sung-hyun said: “The worst period seems to have passed. The basic effect of the supplementary budget and fiscal financing will stimulate investment. ”
Analysts predict that the economy will decline by an average of 0.4% throughout 2020, but the International Monetary Fund (IMF) predicts a contraction of even more than 2.1%. Last week, the Governor of the Bank of Korea set the forecast for the magnitude of the economic downturn in 2020 to be 0.2% higher than expected, which was inevitable.