Two of the world’s leading economies are in an unexpected recession. The governments of Japan and the United Kingdom on Thursday released disappointing figures showing that the economy contracted for two quarters in a row. Japan has lost its crown as the world’s third largest economy due to the recession. This place is occupied by Germany, the largest economy in Europe.
As the world’s biggest and most important development partners, Japan and the United Kingdom, fall into recession, the allies of these two countries may be affected. Especially in trade and different areas it can be affected.
The World Bank said last month that the global economy is set to hit a record low by the end of 2024. The world will see the slowest half-decade of GDP growth in 30 years. However, the multinational lender’s latest Global Economic Prospects report says the global economy is in a better place than it was a year ago. The risk of a global recession has decreased mainly due to the recovery of the US economy. But rising geopolitical tensions could pose new near-term dangers to the global economy.
The World Bank is forecasting that global growth may slow for the third year in a row. Growth this year may be 2.4% as against 2.6% last year.
Japan in recession
Japan’s economy unexpectedly plunged into recession. The country’s economy is now the fourth largest in the world. Japan fell below Germany due to a weak yen, an aging population and a shrinking population.
In comparison to the year before, Japan’s gross domestic product (GDP) shrank by 0.4% in the final three months of 2023. The GDP decreased by 3.3% in the preceding quarter.
But Japan is not in a major crisis. The country has very low unemployment and is well positioned for trade, said Marcel Tiliant, head of the Asia-Pacific region at Capital Economics.
The country also lost its third-largest economy status, more than a decade after losing the second-place crown to China. This is attributed to the large depreciation of the yen against the dollar over the past two years.
At one time, Japan’s position was second only to the United States in the world economy. In 2010, the country of the rising sun lost its position to China’s economic power.
Economists had expected Japan’s GDP to grow by more than 1 percent in the fourth quarter of last year. Two consecutive quarters of economic contraction is generally considered a recession.
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The International Monetary Fund (IMF) predicted in October of last year that Germany would surpass Japan to become the third-largest economy in the world in terms of US dollars. The IMF will announce changes in its rankings only after both countries release the final version of their economic growth figures.
Economist Neil Newman told the BBC that the latest figures show that in 2023, Japan’s economy will be around $4.2 trillion and Germany’s will be $4.4 trillion.
UK
The UK economy is also in recession, government figures show. The economy of the United Kingdom ranks sixth globally. The UK’s GDP shrank by 0.3 percent in the last three months of 2023 after a 0.1 percent contraction in the third quarter, the UK’s Office for National Statistics (ONS) said in a statement on Thursday.
The fall in GDP in the fourth quarter of 2023 was the biggest since the first three months of 2021, the ONS said. Sterling weakened slightly against the US dollar and euro shortly after the release of the GDP data.
The economy of Britain has not grown in almost two years. This is expected to increase slightly in 2024, the Bank of England said. But this slow growth could put Prime Minister Rishi Sunak at a disadvantage in this year’s national elections.
Chancellor of the Exchequer Jeremy Hunt said there were signs of the British economy becoming marginalised. Lowering taxes on jobs and businesses is essential to building a strong economy. According to reports, Jeremy Hunt wants to cut billions of pounds in government spending in the March 6 budget.
According to the data of Forbes India, India’s position in the world economy is now after Japan, i.e. fifth. It is followed by UK, France, Italy, Brazil and Canada respectively.
