Businesses in the US and Europe are reporting some of the largest economic contraction in their lifetimes.
In its annual economic freedom index, the International Monetary Fund said this year’s contraction in the eurozone and Japan was “a big deal.”
“The decline in output and prices in the Eurozone and the Japanese economy is the largest since 2008 and the largest decline since 1929,” IMF economist Michael Tirosh wrote.
“The contraction is also being felt in the United States, which has experienced the most rapid decline in GDP since the Great Depression,” he continued.
Tirosh said the recession has “left many businesses with a lot of debt, with businesses having to borrow money to maintain operations.”
“We have seen a rise in defaults on credit card debt and debt to real estate,” Tirosches noted.
“These defaults can be traced back to the 2008 financial crisis and the subsequent recession.
In addition, many business are now unable to borrow against their property as it is hard to refinance and sell when the property market has been in free fall.”
The report also noted that “there is a large risk that the US may face a prolonged period of economic weakness and a potential economic downturn.”
The US economy is now down by 2.6% from last year.
This is in addition to the 1.3% decline in the EU and 0.7% decline elsewhere.
According to the IMF, the eurozone has experienced “a sharp slowdown since the global financial crisis,” and the recovery in Japan is now slower than it was a year ago.
The report notes that “the eurozone’s economic recovery has been hampered by high unemployment and a slowdown in economic activity.”
It said the “lack of economic growth has not been matched by a corresponding drop in unemployment and wages.”
“While the recovery has improved, there are still some areas in the economy where the recovery remains weak and unemployment remains high,” the report stated.
In the United Kingdom, the unemployment rate has risen to 11.3%, which is the highest since 2007, the report said.
The IMF said that, despite this, there was “much more optimism than pessimism” about the UK economy.
“It is difficult to find much agreement among economists about the future of the UK’s economy,” it noted.