The global recession has been underway for a year and I’ve been wondering how long will it last. How bad can it get before the return of growth?

Being from the UK I often read the BBC News website and spotted this graph that really puts it into perspective. It shows a comparison between the current downturn and the recessions in 1980 and 1990. Keep in mind these figures are for the UK only.

We can clearly see that the red line is marching downwards without any sign yet of turning. The recession is already much worse than that of the 1990’s and seems to be matching that of the 1980’s. Obviously no one knows when it will actually turn but lets assume it matches the 1980’s recession. In that case we can expect all of 2009 to consist of negative growth. Starting in 2010 we could see growth return but it would still take another two years for output to reach pre-recession levels.

If however, the red line keeps going past the 1980’s level then we can expect even more than 3 years before the economy is back in reasonably good shape. That means we will be telling our kids about the Great Recession.

But we need to take care before becoming as depressed as the economists. This recession is going to split people into two groups. If you’re laid off then things are going to be pretty rough for quite a long time. But remember that 90% of people will not lose their job. That means 90% of households are paying much lower interest rates of their mortgage and if you need to replace your car then now is the best time of your life. So most people will have the chance to emerge from the downturn in a much better financial position than when they entered it. I hope that that most of us fit into that category.

This entry was posted on Thursday, April 16th, 2009 at 12:00 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.