What is a recession?

📘 In Brief A recession is a phase in which a country’s economy shrinks for at least two consecutive quarters. This means that overall economic output, i.e., gross domestic product, declines and no longer grows. During this period, companies produce less because demand for goods and services falls. This often leads to rising unemployment, falling incomes, and more cautious consumers who spend less money. A recession is therefore not a sudden crash, but a prolonged economic downturn that can reinforce itself. It only ends when production increases again over several months and confidence in the economy returns. 🔍 Why This Matters A recession is a significant, cyclical weak phase of the economy, manifesting as a decline in real gross domestic product over at least two consecutive quarters. In economics, it is considered part of the business cycle that follows periods of expansion and is characterized by falling production, rising unemployment, and declining investment. The causes are diverse, ranging from demand shocks and financial crises to exogenous shocks such as pandemics or spikes in commodity prices. In practice, a recession is only confirmed when, in addition to GDP, other indicators such as income, employment, and industrial production fall over several months. For businesses and households, this typically means falling profits, reduced consumer spending, and increased caution regarding major purchases. Governments and central banks often attempt to over …