When the GDP per national output falls, it causes a recession. It has a lot of negative impacts on the economy of a country. The level of impact depends on how long the recession period lasts for. Here are the major negative consequences of the economic recession.
If the GDP of a country falls, it will lead to unemployment. The main reason is that some firms will go bankrupt and so everyone in that firm will lose jobs. Those firms which survive the period of recession will go for job cuts and stop hiring new people. The young generation gets most affected by increased rate of unemployment.
During a recession, the firms tend to keep their costs down. By giving lower salaries to employees, they can control their costs. Some workers, especially the temporary workers, may even experience wage cuts. Other workers may have their hours of employment cut. So, eventually, they will receive fewer wages too. The firm may ask permanent employees to become part-timers.
The tax revenue will fall due to a recession. Companies will make less profit so that the government will get low corporation tax as well. As workers will have less income, the government will receive less income tax also. The house prices will be lower, so less housing transaction will take place and there will be lower stamp duty. There will be less expenditure and so the VAT payments will also be less.
As tax revenues will fall and the welfare payments will rise, there will eventually be a budget deficit and the government will be in debt. This will be very bad for the economy of the country.
Recession affects both individual lives and the economy of the country as a whole. The government should forecast situations that may lead to recession and take necessary steps to overcome it. Otherwise, the entire economy of the country will suffer.