What is stagnation and recession. What is a recession in the economy: types, causes and real examples. What is a recession in Russia and what does it threaten

Stagnation means a decrease in the growth rate of the country's economy as a whole or its individual segments to a value equal to zero.

The beginning of stagnation is evidenced by a decrease in GDP growth to 2-3% compared to the previous period. The growth rate of a healthy economy should be at least 3-5%. Stagnation is considered a phenomenon that precedes the development of a crisis or is of a protracted nature. One can speak of stagnation only when there are no changes in all spheres of the economy for several years.

The term "stagnation": what is it in simple words

Stagnation (literally from Latin - "stagnant water") is a state of the economy, which is accompanied by stagnation in the sphere of production and trade. It is characterized by the following features:

• GDP growth rates equal to zero or close to this value, as a result, the country becomes uncompetitive;
• a decrease in the growth of nominal wages - the standard of living falls gradually, but it is almost impossible to stop this fall;
• rising prices for basic commodities;
• reductions in enterprises and an increase in the number of unemployed - there is an outflow of capital, organizations are less well off;
• stagnation is prolonged.

During the period of stagnation, the economic structure remains unchanged, there are no introductions in the field of scientific and technological progress. It is very important to distinguish stagnation from the crisis state of the economy, when GDP growth is sharply reduced. Stagnation is characterized by a lack of growth or a slight increase in production or trade, but not a strong fall.

If stagnation is accompanied by a high rate of inflation, then this phenomenon is called stagflation(rising unemployment and prices at the same time).

In simple words, stagnation is the period in which there are no changes in the economy, there is no growth in production, and eventually this state will lead to decline.

Types of stagnation

Stagnation manifestations are divided into two variations: monopolistic and transitional. Each species has its own characteristics and origin.

monopoly

The development of this kind of stagnation is associated with numerous organizations that are not interested in competition. Such monopolists cease to produce products or provide services of proper quality. As a result, a large number of goods or services of poor quality appear on the market, and the economy falls into stagnation.

Steps you can take to get out of this situation:

• transfer of capital outside the country, since as a result of overproduction it is impossible to use the capital formed as a result of the activities of enterprises;
• direct free funds for the development of scientific activity, technical progress or for the implementation of public programs;
• reduce production costs;
• increase the purchasing power of the population;
• the emergence of competitive enterprises on the market that can fight monopolists.

As a result, corporations will not be able to turn a blind eye to the quality of their products.

Transitional

This kind of stagnation occurs when the economy gradually moves to another level. Mistakes made in governing the country during this period will undoubtedly lead to stagnation. There is a sharp decline in production, investment activity is reduced, capital outflow increases. The reasons for the development of transitional stagnation can be called:

• non-compliance by enterprises with market principles;
• decline in economic growth due to lack of resources for development;
• the absence of a competitive product, access to the world market becomes impossible.

The next stage after the transitional stagnation is recession(drop in GDP growth to zero or negative compared to the previous period).

Causes

The stagnation in the economy is accompanied by a decrease in growth in the manufacturing, investment and trade areas. This leads to an increase in the number of unemployed and a decrease in their standard of living. The reasons for this are:

• slowdown in economic processes due to the high level of bureaucracy among officials;
• insufficient level of qualification among the managerial personnel and the leadership of the country, which reduces the possibility of making correct and timely decisions on economic issues;
• inability to analyze the situation of past years, an incorrectly formed plan and strategy for the development of the state;
• underfunding of scientific and technical areas reduces the competitiveness of goods on the world market and production potential;
• lack of modern approaches to the development of the country;
• resource - oriented economy of the country;
• depreciation of fixed assets at industrial enterprises, unwillingness of the management of large organizations to change production equipment to modern ones.

Getting out of a stagnant state

The fight against stagnation should be aimed at the following measures:

• introduction of new technologies, investments in efficient, production projects. This approach will reduce production costs, increase labor productivity and competitiveness of the product. Increase sales volumes;
• encouragement of entrepreneurial activity, development of market conditions;
• providing financial, legal assistance from the state to enterprises to create competition for monopolies;
• increasing the role of the household in the economy;
• development of the country's microeconomics - raising the standard of living of the population, its purchasing power;
• reduction of tariffs for the services of natural monopolies;
• attraction of foreign investments.

Consequences for the national economy and business

As a result of a decrease in the level of the country's economy, the population may show discontent, up to rallies, riots. The mismatch between real income and the ever-increasing prices of basic commodities and layoffs in enterprises leads to poverty. People have reduced purchasing power, they are forced to abandon many goods. As a result, the volume of sales decreases, the turnover and the volume of production fall.

The economy enters a closed cycle, which leads to an even greater fall and a recession stage. Investments are moving to other countries with more successful economies. Often there is an increase in taxes and tougher penalties. As an additional control, the country's leadership may introduce ration cards or a curfew.

Another consequence of stagnation (although not necessarily) is inflation. When the rise in prices for goods and services increases, and money depreciates.

How to run a business during stagnation

The task of a businessman is not only to stay afloat during a period of stagnation, but also to bring his enterprise to a new level and strengthen its position.

1. The main problem during the period of stagnation will be the attraction of new financial resources. An entrepreneur can get cheap borrowed funds in foreign countries.
2. It is recommended to suspend investing in long-term financial projects, as well as not to take risks and not take part in new programs.
3. Enterprises that do not have loans will be in a favorable situation. Those who have borrowed funds should seek new sources of financing in advance. Perhaps the new loan will have higher interest rates, but without working capital, the enterprise is threatened with bankruptcy.
4. Optimize costs. Think in advance which of the employees can be fired without harm to the business.
5. Reduce advertising costs, with a recession in the economy, it does not bring the desired result.
6. Actively look for your client.
7. Focus your business on paying customers. At a time of crisis, dealing with debtors is not worth it. This approach will allow you to stay afloat and survive stagnation. Develop a loyalty program for key customers.

The actions taken will allow the entrepreneur to strengthen and develop new relationships, improve the quality of services provided. In crisis conditions, the quality of goods or services becomes the main criterion that will allow the enterprise to function. To do this, you need to identify all the shortcomings in your activities.

Is it possible to earn in such a period

Entrepreneurship depends on the purchasing power of the population. Therefore, if you occupy a niche that is inextricably linked with the everyday life of people, you can earn money even during a downturn in the economy. For example, mini-cafes, bakeries that do not require large initial capital. The greatest success will be achieved by those entrepreneurs who introduce a new product to the market, non-standard ideas and are looking for new connections.

What you should pay attention to when doing business in a period of stagnation

While doing business during periods of stagnation and decline in production, it is worth paying attention to long-term mutually beneficial relationships with your customers. In such a difficult time, you need to be especially customer-oriented. Personally come and ask if customers are satisfied with your services, in what form they would like to receive these services. This will help not only strengthen relationships with existing customers, but also find a new circle of customers.

The company may review the specifics of its activities for compliance with the criteria that serve as the basis for obtaining regional benefits for income tax or corporate property. Many enterprises in order to optimize the tax transfer their activities to other regions.

At this time, it is especially important to increase the internal efficiency of the enterprise. The period after the crisis or stagnation is the best time for investment, so you need to have money in the organization.

The company should carefully monitor the demand in the market: if yesterday the product was not in demand due to the fact that the more expensive product of competitors was popular, then in conditions of stagnation, the offer of this cheaper product may turn out to be profitable.

It is important to establish relations with the state in order to obtain state support at the right time.

Stagnation is a stagnant phenomenon, but this does not mean that it is impossible to do business during this time. Yes, many enterprises will close, not having time to adapt to the new conditions for doing business. Others, with the right approach, will stay afloat, attract new customers and get out of the crisis period.

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The business activity of any enterprise or the economy of an entire state includes several stages. First there is an upswing, then the work reaches its peak. Sooner or later there is a recession, which can end in complete decline. Predetermining is the third stage preceding the crisis. This stage is called a recession. Let's talk about it in the article.

general information

There are two ways out of recession. An economic recession can lead, as mentioned above, to the complete decline of the country with all the ensuing consequences. The decline in activity can also be used by the government of the state to find solutions to urgent problems that will allow entering a new cycle of growth.

concept

The state of the economy, which often occurs after an increase in all indicators and has a non-critical decline in production, is called a recession. During this period, there is a deterioration in key indicators that affect macro indicators. The fact that the economy is in recession is evidenced by:

1. Decline in GDP indicators.
2. Decreased income of the population.
3. Deterioration of investment attractiveness.
4. Reducing the volume of production of industrial enterprises.
5. Decreased consumer activity.

An economy in recession means that the country has entered an unfavorable period. During it, enterprises reduce production turnover, produce fewer goods, citizens receive cut wages, which is why they begin to save.

The reasons

An economy in recession can be due to:

1. The collapse of gas and oil prices. Their decline leads to economic recession in countries where these resources act as a key strategic product.
2. Active growth in the cost of raw materials. It can be triggered by increased consumer demand and hype.
3. Issuance of an unacceptable number of mortgage loans with a high percentage of risk.
4. Reducing production volumes in all industries.
5. Decrease in salaries and other incomes of citizens. This entails, accordingly, the deterioration of the population.

What happens in the economy after the recession process? The consequence of the recession inevitably becomes a depressive state or crisis. According to all economic laws, it will not be possible to avoid such a state. However, thanks to the activities of analysts and other specialists, the process can be significantly smoothed out. The work of the highest state minds will reduce the negative effect of the recession, reduce the scale of the consequences.

Scope of distribution

If in any country the economy is in recession, then this can lead to negative consequences not only within this state. At present, there is active international cooperation. The economic activity of one country may be closely related to certain sectors in other states. Thus, a decline in one subject will inevitably lead to a deterioration in the situation in another. This, in turn, can lead to a global world crisis. Thus, in particular, according to a number of analysts, the EU economy is in a deep recession. In the framework of international relations during the recession, there is a decrease in the indices on the stock exchange. As a result, the state currency of the country whose economy is deteriorating depreciates. This, in turn, raises the possibility of non-payment of external debt. When the economy is in recession, it is mainly the businesses operating in the country that suffer. They face the need to reduce production volumes due to inefficient consumption of goods. Untimely payments for delivered products lead to tax and wage arrears. As a result, enterprises that are not ready for a crisis are recognized as insolvent (bankrupt). The impact of the recession is acutely felt by the direct consumers of goods. The population receives lower salaries, people become insolvent, cannot fulfill their loan obligations, fall into debt pits.

Classification

When the economy is in recession, experts analyze the reasons for this situation. Based on it, the type of recession is determined:

Period

A downturn in the economy is recognized if the decline in production volumes and the deterioration in gross indicators occurs for more than six months and begins to take on a protracted character. The duration of such a period will directly depend on the reasons that caused this situation. For example, if there is a recession of a political or psychological nature, then the duration of the recession can be reduced by restoring the confidence of the population and businessmen. To do this, loyal measures are applied in the areas of lending and social security. The situation is different with an unplanned recession. As mentioned above, it is quite difficult to predict such a decline. It depends on negative global factors. A state in which there is a decline in production cannot influence them. In such a situation, the only thing that analysts can do is to develop measures aimed at smoothing out negative effects as much as possible.

Recession in Russia

The state of the domestic economy directly depends on the indicators of the oil and gas market. The rapid fall in energy prices entails a number of negative consequences for the country. First of all, the volume of revenues that are directed to the budget fund from the sale of strategic products is decreasing. begin to fall, followed by the weakening of the ruble. The decline in production causes a decrease in the income of citizens. The consumer activity of the population is deteriorating. With a simultaneous decrease in the income of citizens, the prices for services and goods rise. The economic downturn in the country is also due to external factors - the sanctions of a number of countries around the world. Since 2015, relations with various international corporations have been severed, which jeopardized the functioning and development of large enterprises, and had an extremely negative impact on the GDP indicator. As experts noted earlier, this state could last until 2017. Today, however, the situation may change if an agreement on the freezing of oil production comes into force.

Recession and stagnation

These two concepts have significant differences. A recession is characterized as a moderate economic downturn. At the same time, stagnation is characterized by a complete halt in key strategic sectors. In this period:

Conclusion

During a recession, the process of reformatting the country's economic regime is launched. Specialists develop and implement plans for the further development and re-equipment of the main branches of the national economy. At the same time, stagnation does not provide for any positive dynamics and adaptation to the new reality. As a result, the country is living out the last stage of its cycle, a deep economic crisis begins.

"What is a recession in the economy?" - this question may be of interest to every person interested in the situation in the country. About what a recession in the economy is, what this phenomenon brings to the life of the state and whether it is worth being afraid of, our article will tell.

What does the word "recession" mean? The meaning of the word from the point of view of economists and ordinary people

The country's economy, just like an ordinary company, develops cyclically: there are periods of revival, growth, slowdown and recession. The term "recession" economists call the period when there is a slowdown in the development of the country's economy.

A recession does not mean that the main economic indicators have stopped growing - just that their growth rate has been declining for 2 quarters in a row. There is a decrease in business activity, enterprises begin to produce less products, due to which their profits decrease. The population begins to experience minor difficulties with work, due to which demand decreases.

This phase of the business cycle usually occurs after an economic recovery. And quite often after it begins a crisis or depression. But competent measures on the part of the state can prevent such consequences and normalize the economic situation in the country.

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What does stagnation mean?

Stagnation is a complete stop of the economy. Production and trade practically stop, unemployment becomes a mass phenomenon, the level of wages and the standard of living of the population are falling.

The stagnation of production can last for a long time, until the state takes measures and begins to bring the country's economy out of this state. In a period when the country is experiencing stagnation, life becomes very difficult.

Recession in Russia - can it be avoided and should it be done?

It is impossible to avoid a period of recession in the economy, and the appearance of a recession is quite natural. During this period, the effectiveness of the work of the state and the functioning of the financial system is checked.

If the right measures are applied during a recession to get out of it, the decline in the growth rate of economic indicators will be almost imperceptible. But if the government uses ineffective measures, the consequences can be serious - up to the beginning of the economic crisis.

Types of recession in the economy

Economists divide the recession in the economy into 3 types.

1. An unplanned recession occurs because of unexpected changes. This may be the beginning of hostilities, the fall in world prices for gas and oil, and much more. As a result, the state budget deficit is formed and the level of GDP begins to fall. According to economists, such a recession is dangerous for the country, since it is impossible to predict it and it is difficult to find measures to get out of it.
2. A psychological or political recession arises from the distrust of consumers, businessmen and investors. Buying activity decreases, the volume of investments decreases, prices of securities fall. But this type of recession is easy to overcome - it is enough to restore the confidence of the population of the country. This can be done by lowering interest rates or using various psychological methods.
3. A recession may also arise due to the growth of external debts. As a result, share prices fall, and cash outflows are observed. Such a recession is also dangerous, as it can last for many years.

Signs of a recession in the economy

It is possible to determine that a recession has begun in the country by a number of signs:

• the unemployment rate began to increase slightly (gradually) in the country;
• there is a decline in production, but enterprises continue to work and provide the population with the necessary products;
• stock indices began to fall;
• inflation rates are increasing;
• there is an outflow of capital abroad.

But all of these phenomena do not have critical indicators. For example, the inflation rate may increase by only 2-3%. When all the listed signs are actively manifested, they say that depression has begun in the country.

What triggers a recession in the economy and what can this phenomenon bring to the country's economy?

A recession can start for many reasons. Economists name 4 main ones that most seriously affect the situation in the country and can lead to a recession.

1. Changing market conditions. WFP growth may slow down due to military action, falling oil prices and more. For example, the main source of replenishment of the Russian budget is the sale of oil. If the price of a barrel falls, a budget deficit immediately begins to appear.
2. Fall of national production. The predominance of imported goods in the country leads to a drop in the activity of domestic enterprises. Consumers see no point in buying Russian goods if they can buy imported goods for the same price. As a result, production rates fall, leading to a recession.
3. Decline in people's income. This leads to a drop in demand and adversely affects the economic situation.
4. Falling investment. If the population with money ceases to trust the state or finds more profitable and reliable ways to invest money abroad, a recession may begin. To prevent this from happening, the state must constantly monitor the conditions provided and improve them - then investors will invest money only in the national economy.

An economic crisis never happens unexpectedly. It is anticipated by a recession. Any economic system, even a progressive one, sooner or later enters a recession stage. A recession is undesirable but inevitable.

What does recession mean

Recession- This is a long, at first not very pronounced decline in production and business activity, which over time is aggravated and turns into a crisis.

The recession period is characterized by such phenomena as:

• negative dynamics of GDP (both the quantity of manufactured products and the demand for it decreases);
• low business activity;
• lack of progress in the economy.

Recession is the stage following the stage of rapid economic development. Since all economic systems are cyclical, a recession can be considered a natural process.

It is known that in each economic cycle there are four phases. Rise and flourishing are inevitably followed by a stage of stabilization and stagnation. Recession replaces stagnation. The “life cycle” of the system ends with an economic crisis.

It is useless to try to predict when a recession will start. Nevertheless, the government can prepare the country for it, take a kind of "amortization" measures that will partially neutralize the negative phenomena that accompany the recession. A crisis will come only if the economic policy of the state turns out to be ineffective.

Causes of a recession in the economy

The economic downturn does not happen all of a sudden. It is the result of many events and processes.

1. 1. A recession can be caused by global and unexpected changes in the market, which, in turn, are provoked by political changes. Roughly speaking, armed conflicts or fluctuations in gas / oil prices on the world market may be to blame for slowing down production rates and reducing demand for any product.

   Unfortunately, the Russian economy is obviously dependent on the cost of oil. As soon as the market price of oil falls, the budget begins to experience underfunding, which ultimately affects the volume of the gross domestic product. Experts believe that a recession that develops according to such a scenario poses the greatest danger to the state, since it cannot be predicted and neutralized in time.

2. 2. The second possible reason for the recession is a total decrease in production volumes. A serious decline in production was recorded in 2008. It amounted to more than 10%.
3. 3. The lack of “extra” money for citizens and the decrease in their purchasing power also lead to a recession. True, it is believed that the recession caused by these reasons is quite surmountable and does not have such sad consequences as a recession provoked by wars or market shocks.
4. 4. Another factor in the occurrence of a recession is the outflow of capital and the lack of investment. Replenishment of the fixed capital of the state occurs at the expense of private enterprises. If the government is interested in these injections, it must provide business with such conditions under which it could develop normally within the framework of the national economic system.

Consequences of the recession in the economy

Now let's list the consequences of the recession:

• there is a collapse of financial markets;
• the pace of production slows down;
• banks limit the issuance of loans;
• interest rates on loans are rising;
• the number of unemployed is also growing;
• incomes of the population are declining;
• GDP is decreasing.

All these phenomena together lead to an economic crisis.

The result of the decline in production is a decrease in the need for workers. Industrialists fire people, and they can no longer find a new job. A decrease in income leads to a restriction of needs. As a result, the demand for goods that can be dispensed with decreases. Production does not experience any incentives for development.

Individuals and legal entities become debtors of banks. Circumstances force banks to limit the issuance of loans. Investment in research projects and industrial enterprises is reduced, the country begins to lag behind in terms of science and technology. Stagnation in the manufacturing sector affects the value of shares issued by industrial enterprises. They lose value.

The next stage of the crisis is characterized by an increase in inflation, the beginning of the devaluation of the national currency. Prices continue to rise and incomes continue to fall. The standard of living of the population is also falling, which leads to mass discontent.

The government seeks financial assistance from more prosperous countries. The external debts of the state are growing. To repay one loan, you have to take several others.

All these negative phenomena directly affect the volume of GDP. Its decline indicates the deterioration of the economic situation in the country.

It is noteworthy that among economists there is no consensus on the nature of the recession. Some believe that this phenomenon in itself is not critical, while others believe that recession, collapse and depression are synonymous.

The question of what is a recession in the economy of the state may excite the majority of its inhabitants, who are interested in the situation. Understanding this economic process will make it possible to realize what impact it has on the economy and life of the state and whether it is worth fearing.

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Recession concept

There are many definitions of this economic term, so you should familiarize yourself with the most significant:

• - one of the phases of the economic cycle, which is the precursor of the financial crisis.
• - a term related to the macroeconomics of the state, it denotes a decline or a noticeable reduction in production rates, following immediately the so-called boom, characterized by the gross domestic product indicator equal to zero or even having a negative value for 6 or more months.
• - moderate, not critical, decline in production indicators, activity of entrepreneurs and economic development rates, usually associated with a decline in GDP.
• - slowdown or fall in the growth rate of the gross product.
• - one of the phases of the economic development cycle, which is the next after the recovery of the economy, accompanied by the achievement of a maximum indicator of economic activity. This phase is the precursor to a depression or crisis.
• - the state of the economy, when GDP has been declining for 2 or more quarters, i.e. factories begin to reduce output, stores sell less, and, accordingly, buyers buy less.
• - a serious reduction in business activity in the country, which is accompanied by a large number of negative consequences (unemployment, a fall in the position on the stock exchanges, a reduction in investment, etc.).

A recession is inevitably accompanied by three main signs:

1. The phase of economic life immediately following a rise or boom;
2. Accompanied by a contraction in economic activity;
3. Leads to a reduction in production.

In many definitions, there is a mention that a recession is a phase of the economic development cycle, and the cycle itself consists of 4 main phases:

1. Climb.
2. Stagnation.
3. Economic depression.

The duration of all phases of the economic cycle, as practice shows, is about 10-15 years.

A recession does not mean that important indicators have stopped growing. This phase may indicate that the growth rate of the main indicators has simply decreased over the course of six months. Usually a recession is a precursor to a crisis, but if all the necessary measures are taken in time, then such consequences can be avoided and the state of affairs can be brought back to normal.

Causes of a recession

This phase of the economy may come as a result of a whole list of various factors, ranging from the cost of petroleum products to the number of unemployed in the country. The main reasons for its occurrence are:

1. The emergence of conditions favorable for the development of a recession due to unplanned domestic economic changes. Thus, this state of the economy can be caused by non-economic events in the country, but by political ones, or by changes in prices at the world level for natural resources, and, in particular, for oil. The Russian economic region is dependent on prices for this mineral, and in the event of a serious drop in its value, the country's budget receives a significant amount less, which, in general calculations, leads to a fall in GDP. Economists argue that it is this recession that is the most dangerous due to the impossibility of predicting it in order to take measures in advance to support the economy.
2. The fall in the pace of industrial production processes, which inevitably entails a recession.
3. Provoking the transition of the economy to a recession phase can be a decrease in the income of the population, which leads to a decrease in the ability to buy and worsens the economic situation of the country. This type of recession is not the worst, and economists argue that it can be dealt with quickly and easily, preventing a crisis.
4. A recession may be the result of an outflow of capital abroad or a reduction in foreign investment and public capital. As a rule, most of the investments are attracted by private entrepreneurs. And in order to avoid such a recession, the government should create such conditions that the entrepreneur seeks to invest in the national economy.

Types of recessions

Economists distinguish three main types of recessions, depending on the reasons for its onset:

1. An unplanned recession resulting from unexpected changes. Such events can be: the onset of war, a sharp decline in the world cost of oil, gas and other minerals. The result of such events is a deficit of financial budgetary funds and a decrease in the level of GDP. It is this type of recession that is most dangerous due to the fact that it is simply impossible to foresee it, and it is even more difficult to determine an effective exit method.
2. Recession at the political or psychological level resulting from increased distrust of the consumer population, entrepreneurs and wealth holders. It is a consequence of a decrease in buying activity, a decrease in investment and a decrease in the value of securities. This type of economic recession can be overcome quite simply by restoring the confidence of buyers, which is done by lowering prices, interest rates and by implementing various psychological techniques in practice.
3. Recession as a consequence of the country's external debts. As a result of such debt, there is a decrease in prices and an outflow of funds from the country. Such a recession is recognized as the most dangerous and can last for many years.

In addition to this causal classification, there is a division of recessions into types depending on the shape of the graph reflecting changes in GDP indicators:

• V recession. Characterized by a fairly powerful and high-speed decline in GDP, which under such conditions does not reach depression. The fall in such circumstances is pronounced, the only one and subsequently leads to the return of GDP to its previous level.
• U recession. GDP in such a situation has a fairly long and stable position at a low level without major movements on the schedule, both up and down, with a rapid recovery in the future.
• W recession. As a result of this phase of the economy, there is a fairly short-term jump in the graph of GDP growth and development to a high level in the middle of the recession stage. The schedule of such a recession resembles several consecutive Type V recessions.
• l recession. In such a situation, a fairly rapid decline in GDP is observed, which is replaced by a long and fairly smooth recovery.

Characteristics of an Economy in Recession

It is possible to identify that in the country such a stage of the economic process as a recession has already begun by the presence of a list of its obvious factors:

1. Gradually, without sharp jumps, the unemployment rate increases.
2. A clearly noticeable production decline, but at the same time, production does not stop, but function, providing citizens with the necessary products, but in a smaller volume.
3. Stock indices began to fall.
4. Inflation rates are on the rise.
5. There is a significant transfer of funds abroad.

At the stage of economic recession, not all of its signs become critical. So, for example, a recession is evidenced by an increase in inflation by only 2-3%, while all other indicators of a recession are active, which is evidence of the beginning of an economic depression.

What does a recession lead to?

The main and most obvious consequences of such a period of economic recession include:

• Reducing the volume of production of enterprises in the country.
• A complete financial collapse of the markets.
• Reducing the number and size of loans provided by banks.
• Increase in lending interest rates.
• Rise in the unemployment rate.
• Decreased income of the population.
• Rising inflation.
• Constant price increase.
• Increasing the country's debt.
• Falling GDP indicators.

The most serious, dangerous and powerful consequence of a recession is the economic crisis. The decline in production leads to a decrease in the number of jobs and massive layoffs. People lose their jobs, start saving, cutting their costs, resulting in a reduction in demand, which leads to an even greater decrease in production.

Also, the debt of residents and enterprises to banks begins to increase, which react by tightening the conditions for issuing credit funds. Lending volumes are sharply reduced, and this leads to a reduction in investment in science and industry. The decline in production leads to a collapse of markets and a decrease in the value of securities, especially shares of large industrial companies.

Such changes are followed by the depreciation of the country's monetary units, which leads to an increase in prices, a reduction in income levels, an increase in citizens' discontent and a reduction in the quality of life for the population.

The government, trying to remedy the situation, begins to borrow more from its neighbors, and all this leads to a reduction in the very GDP, which is a sign of the onset of a recession that can develop into depression and crisis.

The difference between recession and stagnation

The period of decline or increase is the main difference between recession and stagnation.

The stagnation phase is characterized by:

• Complete economic stagnation lasting for a long time.
• Increasing the number of unemployed.
• Serious decline in the quality of life of citizens.
• Small or almost zero GDP.

If economic stagnation is characterized by high inflation, then it is called stagflation.

A recession is characterized not by a rapid decline, but not by stagnation. And this clearly indicates that recession and financial stagnation are distinguished by periods of decline in GDP and its consequences for the situation in the country. To understand what is worse than a recession during a recession or stagnation during stagnation, it is necessary to consider each specific case separately.

A recession does not mean at all that the country is in danger of depression and people should prepare for difficult times. With a competent economic approach to government, all the consequences of a recession can be prevented by bypassing the phase of economic depression. But, of course, this is not always possible, therefore, before drawing conclusions about the economic situation in the country, one should consider all economic indicators and the reasons for the onset of a recession.