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I heard that for 2020, the global economic forecast is recession. The growth will be less than 2.5%. But isn't recession is when there's a decrease in GDP (for two consecutive quarters, as I recall), not just a lower growth? Why is the term applied so unusually (unusually, right?) in this case?

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  • $\begingroup$ Please rephrase your question more clearly or it will be closed. $\endgroup$ – emeryville Mar 28 at 15:15
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    $\begingroup$ "for 2020, the economic forecast is recession. The growth will be less than 2.5%." Where exactly? $\endgroup$ – SX welcomes ageist gossip Mar 28 at 17:41
  • $\begingroup$ @Fizz Globally. $\endgroup$ – Sergey Zolotarev Mar 28 at 22:32
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It helps to link to articles that you're (probably) talking about:

It’s hard to put a number on it. For one thing there’s no agreed definition of a world recession. According to a rule sometimes used by the IMF, a world recession is when the global growth rate is less than 2.5 percent. Global growth doesn’t turn negative often. It happened in the global financial crisis of 2008 and 2009. Back then, Europe, Japan, and the U.S. went into prolonged negative growth. Meanwhile, during the 2008–2009 crisis, for China a recession meant falling from 10 to 6 percent growth. The point is, because of stronger trend growth among developing countries, if you’re measuring the rate of growth of total world GDP, the criterion for a recession can’t really be negative. Hence the 2.5 percent criterion. In any case, the important point is that the probability of a global recession is certainly much higher today than it was a month or two ago.

The IMF seems to have picked up that 2.5% threshold because it's the 10th percentile (that is below 90%) of the growth recorded in the past 25 years... but they actually call it a "downturn" not a recession, at least in that [2019] document I found:

The resulting risk assessment can also be used to calculate the probability of a global economic downturn. The estimated probability of one-year-ahead global growth below 2.5 percent—the 10th percentile of global growth outturns in the past 25 years [...]

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NOTE: the question has been modified to refer to a global recession (or I missed the global qualifier). This answer is for a national recession. The answer by @Fizz discusses the global case. I will leave my answer unchanged.

There is no international standard for a recession definition. Definitions are country-specific. For example, in the United States, the National Bureau of Economic Research (NBER) has a committee that makes recession date determination decisions, based on a number of criteria.

The NBER has a FAQ, which probably covers everything you want to know: link.

(Other countries have similar committees.)

Otherwise, people use two consecutive quarters of declining real GDP as the definition of recession. The advantage is that this is uniform across countries. Some people call this a “technical recession” in countries that have a recession-dating body (like the NBER).

Note that we need to look at quarterly GDP, annual GDP could still rise (as in the question), yet there is a recession.

For countries that grow very rapidly in real terms, some people will call a reduction in the growth rate a “a growth recession”. The developed countries no longer grow that fast (in recent decades, only some Asian economies like China grew that fast on a sustained basis), and so it does not come up very often. As such, the term is not very well defined, since it is not used much.

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  • $\begingroup$ When would there be a global recession (in terms of criteria)? $\endgroup$ – Sergey Zolotarev Mar 28 at 22:37
  • $\begingroup$ Ah. You added the global qualifier? The answer from @Fizz covers that. $\endgroup$ – Brian Romanchuk Mar 29 at 2:11

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