Recession 2009

An study of recessions over

the years and what the
current recession holds

Sreyans Jain
- Operations excellence &
Transformation expert
in the BPO space
Recession– what is it?

 Period of slow or negative economic growth determined by:

– Slowdown in industrial production
– Falling oil prices (with reduced demand)
– Reducing demand for goods and services
– Higher rate of savings than investments

 Two consecutive quarters of falling GDP

– Falling imports and exports
– Reduced capital flows

 Rising unemployment
– Increasing layoffs
– Dearth of new jobs
 Leading to a recession

2
Years

1
Recession

0
 Recessions over the years

The recent recessions

1982
1975
Declining
Declining 1991
growth in
growth in
US and
industrialized Busting
Latin
economies of the 200
America
technolog 9
y bubble
US
credit
crisis
 Comparing recessions

 The 1991 recession lasted until

1993, using market weights; all
other recessions lasted one year.
COMPARIING RECESSIONS  In 2001, conversely, many
advanced economies had mild
4 Per capita
output
recessions, but growth in India
Industrial
and China remained robust.
2
production  Sharper declines happened
Growth Percentage

Total trade
0 across almost all indicators in
1975 1982 1991 Proj 2009
Capital flows 1975 and 1982 than in 1991
-2
Oil
 World trade grew in 1991 despite
-4 consumption
recession
Unemployment
-6
 Unemployment is expected to
increase by 2.5 percentage
-8
Years
-11.75 Sharpest decline in trade points, higher than any
recessions
 In 2009, almost all advanced
economies are expected to be in
recession
 2009 will be the most severe
global recession in the post world
war period
The Recession cycle -2009
The declining ‘US’ importance in recessions

 Economic growth of US and the

world are not synchronous today
 In the last six years, US has
contributed to 10% of world
growth whereas China has
contributed 35%.
 Europe, Canada and China- the
biggest trading partners of the US
will be affected

 Declining share of US economy in

the world GDP also differentiates
this recession from others
 The US share of world economy
has dropped from 28% in the
1950s to 19% in 2008
But ….US still impacts

 Crisis generated in advanced market economies, predominantly in the

US has spread to emerging economies
– International trade with the US is impacted
 Increase in US unemployment rate
– 5.7 million jobs lost since December 2007
– 65,400 jobs lost in a single week – last week of Jan 2009
– Unemployment rate increased to 9% in April 2009
 Vanishing household wealth
– US suffered losses on household wealth to the tune of $11 trillion (almost
equivalent to the GDP) in 2008
 Pressure continues on Financial institutions:
– Asset values continue to decline
– Lending to households and corporations is being discouraged
– Credit card delinquencies have gone up
– Largest US bank Citigroup incurs $45billion losses/write offs in 2007
 Recent trends and projections on key
indicators

Real GDP TRADE

Growth rates & projections Growth rates & projections
10.0 16
Wold trade
Volumes
8.0
11
India
6.0 I mports
Advanced
6
Growth Percentage

World economies

Growth Percentage
4.0
Output Emerging I mports
economies 1 Emerging
2.0
US economies
2007 2008 Proj 2009 Proj 2010
0.0 Exports
-4
2007 2008 Proj 2009 Proj 2010 Advanced
-2.0 economies
Advanced
economies -9 Exports
-4.0 Emerging
economies
-6.0 -14
Years Years

OIL - Price fluctuations

60.0 $160.00 Projections
40.0 $140.00
• India will grow at 4.5% in 2009
20.0
$120.00 and 5.6% in 2010
Percentage chagne

Price per barrel

$100.00
0.0
2007 2008 J uly 11 End Dec 2009 2010 $80.00
-20.0
(Peak) (Low) (proj) (proj) • Oil prices hit $38 per barrel in
$60.00
2008 expected to move above
-40.0
$40.00 $110 in 2010
-60.0 $20.00
• Trade will be effected across all
-80.0 $0.00
economies – emerging &
advanced
Are we leading to the Great Depression of
1930?

The Great Depression -1930 Recession - 2009

Epicenters around the US crisis Epicenters around the US crisis
Credit boom of 1920’s was largely US Credit boom of 2004-2007 spread
specific across advanced & emerging
economies
Downward pressure on prices leading In mid-2008 inflation was prevalent in
to deflation most economies providing initial
cushion
Retail depositors withdrew their funds Bank runs by retail depositors
out of fear prevented due to the reassurances
provided by deposit insurance
Counter policy responses were Strong and swift recourse to
virtually absent macroeconomic policies
Little international cooperation due to Much organized international trade
political tensions among major with countries getting together to
countries counter recession
Better political scenario, stronger macroeconomic policies and the
resurgence of emerging and developing nations put us at a better stead
to fight the current recession
The road ahead: dark clouds and silver linings

India,
Real GDP Growth Rates- China & Russia
Trends and Projections accounted for 50% of
15 global economic
growth
World
10
India
China India & China
5 will lead the revival
Percentage

US
UK with growth in excess
0 Russia of 5% in recession
2001 2002 2003 2004 2005 2006 2007 2008 Proj Proj Proj Germany
2009 2010 2014
J apan
-5 Economies –
advanced and
emerging will see
-10
negative growth in
2009

Year Highs/Lows
2007 China registered 13% growth with India & Russia at 9.3% and 8.1%
respectively
2009 Japan is projected to register negative growth of -6.2%, US at -2.8%,
UK at -4.1% bringing down global growth rates by -1.3%

2014 China and India are expected to be back on track with 10% and 8%
growth rates respectively
Success stories during Recession

SUCCESS STORY – 1

A success during the Great

Depression is the motion picture
industry.

People were so distressed and

fearful about their economic
condition they needed emotional
relief and a means to escape. The
movies provided that relief, no
matter how brief and temporary. The
movie industry identified the need
and opportunity and filled it at a
The movies of the Great Depression normally had
price people were able to pay. common themes. Most of them provided an escape
for viewers. These movies, such as The Wizard of Oz
(1939), Snow White and the Seven Dwarfs (1937),
and Gone with the Wind (1939), allowed people to
Opportunity always exists; it may think about faraway places instead of household
be harder to recognize in tough chores

times because it takes a different

Success stories during Recession

SUCCESS STORY – 2

In 1927, a young married couple

started a hot dog and root beer
stand called ‘The Hot Shoppe’. They
had many years of success but they
saw greater opportunity along the
new highways being built across
America. They opened a motor lodge
for travellers to sleep overnight.
That venture helped J. Willard and
Alice Marriott build one of the
greatest hotel chains in the United
States. In 2007, ‘The Marriott
Corporation’ was handling over
50,000 reservations a day!

Sometimes taking new roads leads

you in a completely different
direction than you had originally
 Thanks

Direct your questions to me at

sreyansjain1@gmail.com
http://www.linkedin.com/in/sreyans9