Economic recovery

Have you heard on the news of the Economic recovery? Do you know exactly what this term refers to? Most people attribute it to a good economic moment, in which the levels of before a problem are recovered, but is it really as good as you think?

If you want to know what the economic recovery is, what it implies and the risks that it entails, then we give you the keys so that you can understand it much better.

The stages of an economic cycle

Before speaking directly to you about the economic recovery, it is important that we talk about the business cycle concept. That is, of the phases that an economy will go through at some point in its life. This situation is cyclical, which means that, over time, it repeats itself.

The five phases of the economic cycle are:

Expansion

We could say that the expansion phase occurs when the economy starts to grow, in such a way that there is a greater consumption and work.

Eye

The boom can be described as the peak of expansion, that is, the peak moment when an economy is at the top. But it is also the prelude to something bad.

Recession

And it is that everything that goes up, at some point has to go down. And that is what happens in the recession period, the economy plummets affecting work, savings, people, etc.

Depression

The depression would also be the lowest point of the recession, when the country is very bad economically and only subsists.

Recovery

We could say that it is the last phase of the economic cycle, but it is also the antithesis of the first phase, that of expansion.

In this begins to break out of depression, to increase economic activity with which there is an increase in the economy.

What is economic recovery

Based on the above, we can conceptualize economic recovery as one of the phases of the economic cycle in which production, consumption and employment increase after having lived through a crisis and having gone through a moment of economic depression.

In other words, it is a rebirth of the economy and, at the same time, a resetting of the economic cycle in such a way that the economy is reactivated (work, the need for labor, investments, etc.) causing that take off the country.

Characteristics of the economic recovery

Although the economic recovery is very simple to understand, it is important to clarify its characteristics.

On one hand, it must be seen as a phase of the economic cycle. It is said of it that it is the last, but in reality, being a cyclical, it really is not, but after it begins a new cycle in which we will also find ourselves at some point with a recession phase and a depression phase.

Normally, recovery occurs when there has been a time of crisis. If the economy is good, a recovery will not be necessary since, at no time, has there been a downturn that makes it necessary.

When economic recovery occurs there are three factors that tend to increase. Sometimes only one is given, while other times there may be more factors. These would be production, employment and consumption.

For example, in the case of the Covid pandemic suffered in 2020 and 2021, the economic recovery represented an increase in all variables: there is more need for employment, production has increased and people, due to this saving, have a greater consumption need.

How long does an economic recovery last?

One of the great doubts of many, people and companies, is knowing how long an economic recovery can last, and how long this will lead to an expansion and a boom, since it is known that economically they are times of prosperity and many benefits.

Really, if we could, we would like to have this type of cycle always, but unfortunately it is not possible, and in the end, when a cap is reached, there is a decline.

The time in which each of the phases occurs is not fixed. That is, it can have a variable duration depending on what is happening in the world.

However, the experts themselves have established three types of economic cycles according to the duration. These would be:

• Short When its duration is usually in the 40 months, that is, approximately 3 and a half years. These are characterized by the fact that the depression phase is never reached.
• Media. When its duration is between 7 and 11 years. They are short cycles that end with an economic crisis.
• Long. They last between 47 and 60 years and the phases are quite mild, plus it takes time to reach the peak. As for the recession, they are very slow, but the outcome, that is, the depression, is very deep and makes the recovery take longer to see, in addition to slowing down the expansion.

Risks of economic recovery

After everything you have seen, it is normal for you to think that the economic recovery is a good thing and that you consider it as a way to wake up the country's economy and to get it back up again. But is it really so?

In reality, there are some aspects that must be taken into account and that affect the population to a greater or lesser extent. For instance:

Period of intense economic activity

There is no doubt that the economic recovery means that there is an increase in economic activity. However, this "boom" that occurs it does not usually last in time, and after a while you can stabilize or slow it down.

Why is this negative? Well, because people do not think so much in the future and in the present.

Higher consumption - Lower savings

After a time of crisis, what one wants is to be able to feel good and for this we usually resort to materialism, consumerism to be able to alleviate that time of "lean cows" that has been lived, with what what has been tried to save now is used to increase the consumption and to buy and to consume much more. Without thinking that another bad time may come.

Differentiated sectors between growth, stagnation and collapse

The experts themselves already warn it. An economic recovery is not for all sectors. There will be some that will grow a lot, while others will remain at acceptable levels and, finally, the third will end up sinking. And sometimes disappearing.

What do you think of the economic recovery? Have you suffered it in your day to day?