Countries on the Brink of Recession: How is Their Economic Growth?

Several countries are predicted to fall into recession due to shrinking economic growth, for at least two consecutive quarters.

Based on Katadata and other sources, Databoks has compiled at least four countries on this list: Japan, the United Kingdom, Germany, and Finland.

Japan

Katadata reports that Japan slipped into recession due to weakening domestic demand, increasing uncertainty about the Bank of Japan's plans to exit its ultra-loose monetary policy this year.

This very weak performance caused Japan to lose its position as the world's 3rd largest economy, replaced by Germany.

According to International Monetary Fund (IMF) data, Japan's annual economic growth was only 2% in 2023 (year-on-year/yoy). Although small, this figure is up from 1% (yoy) growth in 2022.

Japan's GDP plummeted 0.4% (yoy) in the October-December 2023 period. In the previous quarter, the Japanese economy had shrunk by 3.3%. The Q4 2023 GDP figure is far below the market median forecast of a 1.4% increase. The collapse of Japan's economic growth is predicted to continue until the January-March 2024 quarter.

(Read Katadata: Economy Worsens, Japan, UK and Germany Enter Recession)

United Kingdom

The UK entered a technical recession due to declining growth in recent quarters. According to IMF data, the UK's annual GDP growth was only 0.5% (yoy) in 2023.

The UK had previously shown resilience, achieving 7.6% (yoy) growth in 2021, after a deep decline due to the Covid-19 pandemic of -11% (yoy) in 2020.

UK Prime Minister Rishi Sunak pledged to boost economic growth as one of his key promises to voters last year.

Ruth Gregory, deputy chief economist at Capital Economics, said that GDP figures have greater significance for broader political policy than economics, as they will be a consideration for the public when voting for Members of Parliament in the upcoming elections.

"News that Britain slipped into a technical recession in 2023 will be a blow to the prime minister on a day when he faces the prospect of losing two by-elections," Gregory said, as quoted by Reuters, Friday (February 16th).

Germany

According to Katadata, the German Chambers of Commerce and Industry (DIHK) warned on Thursday (February 15th, 2024) that the German economy will shrink by 0.5% in 2024. This is expected to be the second year of recession and the worst decline in two decades.

The first instance occurred in 2002 and 2003 when the two consecutive recessions prompted the government to introduce aggressive labor market and welfare reforms to improve Germany's competitiveness.

Based on IMF data, Germany's growth fell to -0.5% (yoy) in 2023. The previous year, German growth was only 1.8% (yoy).

Finland

IMF data shows Finland's growth at -0.1% (yoy) in 2023. This is a sharp drop from the previous 1.6% (yoy) in 2022. Since 2010, its growth has not exceeded 4%, as seen in the graph.

According to CNBC Indonesia, Finland's economy entered a technical recession at the end of the year. This is due to persistent high inflation and rising borrowing costs, which reduce activity and demand.

(Read also: Officially Bankrupt, Ghana's Government Debt Ratio Reaches 98.7% of GDP in 2023)