San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

The Global Impact of the 2008-2009 Recession

What is presented below are displays of how a selection of countries have been faring in the the recent past. These displays were created from the National Accounts statistics compiled by the International Monetary Fund (IMF). Other sources of statistics are available, but the IMF statistics were used to insure some commonality in the data.

The statistical tabulations cover the period from the third quarter of 2007 (2007III) to the second quarter of 2009 (2009II) for some countries. The third quarter of 2007 is used as the starting point because the National Bureal of Economic Research (NBER) dates the recession as having started in the fourth quarter of 2007. The NBER's dating is a reflection of an outmoded notion of a business cycle. The output recession did not start until the fourth quarter of 2008. Nevertheless the NBER dating for the beginning of the recession will utilized.

For some countries the GDP figures for 2009I are the latest available from the IMF. It would be nicd to have the more recent statistics but it is infeasible to try to find alternative sources.

In order to show the impact of the recession in greater precision what is plotted is the percentage change in real Gross Domestic Product (GDP). Since the recession started as a result of misguided economic policies in the U.S. the first graph will include the U.S. It also includes Japan and the United Kingdom (U.K.).

The IMF statistics on the real GDP of the U.S. differ from those compiled by the Bureau of Economic Analysis (BEA) of the Department of Commerce. The IMF statistics clearly indicate that the output recession in the U.S. did not begin until the fourth quarter of 2008. Japan is being harder hit by the recession than the U.S. but Japan's decline in real GDP started before the U.S. economy entered the recession. The United Kingdom (UK) experienced a decline in growth in 2008III and finally a decline in real production in 2008IV, but generally the pattern is very much the same as for the U.S..

The Impact on Some of the Economies of Western Europe

The countries of Germany, France, Italy and Spain are all part of the European Monetary Union so their GDP's can be compared without a currency conversion.

Note that the IMF reports the quarterly GDP of these countries, as do the countries themselves, on a quarterly basis. The annual rates are those rates multiplied by four.

The impact of the global recession is shown below.

Thus Italy has been the hardest hit of the four by the recession. Germany was initially not affected and then was hit nearly as hard as Italy. Spain was the least affected of the four but ultimately was hit nearly as hard as France was.

The Impact of the Recession on Some of
the Relatively Smaller Economies

It is worthwhile to look at the impact on some of the smaller economies. Theory suggests that they would be more strongly affected. The old saying was, "When the U.S. comes down with a cold, the rest of the world experiences pneumonia."

First consider the economy of Portugal. The graph below shows what happened to it in comparison to the much larger economy of Spain.

Again the smaller economy was initially not affected and then it was affected very severely.

The economies of Belgium and the Netherlands are not small on the world stage but they are small relative to those of Germany, France and the United Kingdom. The graph below shows the Netherlands being affected in a pattern very similar to the larger western European countries. Belgium, on the other hand, was experiencing some booming growth separate from what was happening in the other countries. But the recession did deflate that boom but not to the point of producing a recession as of 2009I.

Some of the Other Economies

The statistics for the Russian Federation show that it is in a separate economic world from the U.S. and the other countries of Europe. It trade is primarily hydrocarbons and the demand for these necessities is not substantially affected by the minor economic fluctuations of the recession. The trade between the U.S. and Russia is minimal and thus a U.S. recession would not have much affect.

Canada and Mexico, on the other hand, are heavily depend upon trade with the U.S. and so a U.S. recession would be expected to strongly affect their economies. The graph below shows that this is true.

The effect on Mexico was delayed but when it hit it was severe. Canada, on the other hand, experienced the U.S. recession in almost the same pattern as the U.S.

The Chilean economy has become dependent upon its exports to the United States so it might possibly be adversely affected by the global recession. The statistics however do not show ouput falling below the 2007III level.

The IMF statistics for the GDP's most of the Latin American economies are not sufficiently up-to-date enough to include in this survey. The graphs for Argentina and Colombia are shown below.

There does not seem to be a common pattern for the three South American economies. They seem to be less affected by the recession and what effect there has been developed late.

The Odd Cases

The IMF has not published the quarterly data for China but the data for India is available. It shows that India went through a short severe recession from which it recovered only to be affected by the global recession due to the U.S. recession. The short recession in starting in 2008I was probably due to something other than the U.S. recession.

Although the data for mainland China is not available there is data for Hong Kong and the shocking revelation is that the Hong Kong economy seems to be in a long term recession unrelated to the current international economy. The Hong Kong economy in recent quarters went through a boom but this was followed by a sharp downturn that probably was due to the current global recession.

An economy which might be expected to follow the same pattern as Japan is South Korea. Instead the South Korean economy has been much more erratic than the Japanese. Surprisingly the South Korean supposedly made a miraculous recovery from the recession in 2009II.

Such statistical recoveries are perhaps becoming more common. See End of Recession?.

South Korea was one of the original Asian Tiger economies. Another of those is Singapore. Singapore was unaffected in the early quarters of the recession but when it was affected it was severely affected. The Singaporean economy went through a major recession but is begining to recover.

Malaysia could be considered one of the Asian Tiger economies. It too was little affected by the recession in the early quarters but then when it was affected it was severely affected.

The Swedish economy has had some sharp fluctuations in in its growth rate. However it seems to be impervious to the current downturn.

The Thailand economy provides an example of a developing economy which is tied into international markets.

The Thai economy went from a near 9 percent annual growth rate to a sharply lower rate and final to a negative rate.

Poland provides a contrast. It went through a short period of near zero growth then a recovery. The recovery was cut short by the global recession.

The survey would not be complete without the statistics for Iceland. As a result of the financial turmoil Iceland experienced a severe financial crisis. The consequences in terms of production could be different than the pattern developing in its financial markets. The economic pattern for Iceland is quite interesting.

The graph shows that Iceland was experiencing a recession before the financial crisis and recession in the U.S. The U.S. recession added to the economic woes of Iceland but was not the source of its economic decline.

Although Iceland was severely affected by the financial crisis and the global recession there were other larger countries that were equally affected. There are other countries far more severely affected. For example, consider the cases of Lithuania and Greece.

At the other end of the spectrum there were many countries not affected by the recession. Many of these are countries whose economies are in the doldrums. However there are some economies which are dynamic and still were not affected much by the recession. Sweden and the Russian Federation were two cases in that category. Another one is the economy of Israel.

(To be continued.)

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