Recession of 1737

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The Recession of 1737 is an ongoing global economic downturn that began in the second quarter of 1737 AN, primarily affecting Nouvelle Alexandrie, Oportia, Natopia, and other Raspur Pact nations. The recession was triggered by the sudden collapse of Normark and Anahuaco, which caused significant disruptions to international trade and financial markets. In Nouvelle Alexandrie, the recession is characterized by two consecutive quarters of negative GDP growth, with a 1.1% contraction in Q2 followed by a 0.1% decline in Q3. Oportia experienced a more severe downturn, with a cumulative GDP contraction of 2.5% over two quarters. Natopia, while not officially in recession, saw its economy slow significantly with a 0.7% GDP decline, largely due to its extensive trade ties with Normark.

The economic crisis has had varying impacts across different sectors and regions within the Raspur Pact. Export-dependent industries in all affected nations have been hit particularly hard, while domestic consumption in some countries, such as Nouvelle Alexandrie, has shown unexpected resilience. The Imperial State of Constancia faced significant political and economic challenges due to its heavy investment in the collapsed Anahuaco Empire, leading to public discontent and political upheaval. The Commonwealth of Zeed suffered from a credit crunch and trade deficit, resulting in both domestic political crisis and a push for new economic partnerships. The Imperial Federation, while its wider economy proved remarkably resilient, still saw its mainland Keltian holdings suffer intensely, even if briefly, and Eternia slip into a somewhat longer recession than its peers due to economic woes in neighboring Eura.

The governments of the affected countries have responded with a range of monetary and fiscal measures, including interest rate cuts, industry support programs, and worker retraining initiatives. In Zeed, promises of a referendum and elections by 1738 AN were made to alleviate local unrest. The recession has also sparked increased economic cooperation efforts between the affected nations as they work to stabilize their economies and adapt to the new economic landscape. This crisis has highlighted the interconnectedness of the Raspur Pact economies and the need for diversified trade relationships to mitigate future economic shocks, with the Imperial Federation's own recent pivot to regionalization proving one lever to reduce negative impacts from weakened neighbors.

Impact

The Recession of 1737 had varying impacts across Nouvelle Alexandrie, Oportia, and Natopia, with the severity differing significantly between these nations. The recession's effects were felt across multiple sectors, including export-oriented industries, domestic consumption, labor markets, and financial markets.

Nouvelle Alexandrie

Nouvelle Alexandrie experienced a moderate economic contraction, with GDP declining by 1.1% in Q2 1737 AN and a further 0.1% in Q3 1737 AN, officially marking the country's entry into a recession. The unemployment rate rose to 3.9%, a significant increase from pre-recession levels but lower than in some neighboring countries.

Despite the overall economic downturn, Nouvelle Alexandrie exhibited an unusual resilience in domestic consumption. The Retail Sales Index rose by 4 points to 112, defying typical recession trends. This resilience was partly attributed to a 2.1% increase in average hourly earnings, which outpaced the inflation rate of 3.1%, resulting in a 3.2% boost to real disposable income for many middle-class families. The nation's stock market saw a 15% decline, reflecting investor uncertainty and reduced corporate earnings forecasts. However, this decline was less severe than in some other affected countries.

Oportia

Oportia was the hardest hit among the three main affected nations, experiencing a severe economic downturn. The country's GDP contracted by a cumulative 2.5% over two quarters, more than double the contraction seen in Nouvelle Alexandrie. Unemployment in Oportia reached 5.2%, the highest among the three countries, indicating significant job losses across various sectors. The nation's heavy reliance on exports, particularly to Normark and Anahuaco, left it especially vulnerable to the trade disruptions. The Vanie Stock Exchange experienced a sharp 22% decline, the most severe among the affected countries. This substantial drop reflected deep investor concerns about the country's economic prospects and the long-term impact of the trade disruptions.

Natopia

While not officially entering a recession, Natopia experienced a significant economic slowdown. The country's GDP declined by 0.7% cumulatively over two quarters, a notable deceleration for an economy that had been experiencing steady growth. Natopia's unemployment rate increased to 3.3%, a more modest rise compared to Nouvelle Alexandrie and Oportia. This relatively lower impact was partly due to Natopia's more diversified economy and its ability to pivot some of its trade relationships away from the collapsed Normark market. The Natopian stock market saw a 10% decline, the least severe among the three main affected countries. This reflected investor perception of Natopia as a relatively stable economy despite the economic difficulties.

Constancia

Significant political, foreign policy, economic, and even military capital had been expended and invested in the Anahuaco Empire, due to the Imperial and colonial designs of the elites of the Imperial State. Despite opposition from the elected government, this Eastern Keltian Gambit continued, and when things went sour, due to the implosion and collapse of Normark and Anahuaco, it became very politically expedient and convenient to blame the entire mess on the allegedly-dithering, distracted, analysis-paralysis government. Public anguish was muted due to scheduled elections to be held at the close of 1737.

Zeed

The relatively-newly-independent Commonwealth of Zeed suffered significantly, due to the slowing of exports to its primary markets, its Euran neighbors: Oportia, Constancia, Suren, and most importantly, Nouvelle Alexandrie. This credit crunch, trade deficit, and economic contraction suddenly caused a domestic political crisis, as well as a sudden foreign policy push in support of Natopian interests, as well as a diplomatic flurry to gain new markets elsewhere. Local unrest was alleviated by promises for a referendum and elections by 1738, in accordance with Article 61 of the Constitution of the Commonwealth of Zeed.

Moorland

The economy of Moorland suffered an odd mixture of inflation but also economic growth as a result of the collapse of its two major neighbors; Anahuaco and Normark, with a partial collapse in the Imperial Federation's territory in Haifa, with a loss of most holdings in that area. The loss of trade with both these nations resulted in a significant loss of economic revenue, and the influx of refugees from Anahuaco saw a sharp rise in inflation as demand for goods - especially food - skyrocketed. But the added demand for goods from Moorland to neighboring communities helped spur economic growth in many areas, with factories reporting record production levels and farmers reporting increased demand for products. Export declines in Natopia and Nouvelle Alexandrie shifted the demand for goods from imports to domestic production, and increased trade with neighboring Mercury. The loss of the Normark route of the Trans-Keltian Express also served to isolate Moorland's economy further, increasing a reliance on goods traded closer to home. King MacMartin promised to explore new trading partnerships in order to alleviate inflation.

The Imperial Federation

The Imperial Federation, while on the whole not experience recession during 1737, did see its economic growth slow down on a macro level. On the whole, the new period of peace allowed the central government to immediately shift to economic/infrastructure initiatives, allowing it to dodge the worst of the effects as a whole. Recessions did happen regionally, however, and those hit hard and fast between its holdings on mainland Keltia and southern Eura.

The entirety of its territories on mainland Keltia were badly affected according to their proximity to the northern Straits of Haifa. The recession in Haifan lands (those now being Haifa, Geneva, and Blore Heath) was a strange one, characterized by four primary things: The ultimate (although localized) victory of joint Ralgonese-Bassarid forces in the Wars of the Dispossessed across the southern banks of the Straits of Haifa, the Ralgonese loss of territory (allowing concentration of local Imperial assets there), the dual migrant/refugee influx from the Green, newly acquired Bassarid lands, and from the collapsed Normark/Anahuaco, and the enhancement of already-heavy stimulus in advance already earmarked for postwar reconstruction efforts.

While Haifa's situation was quickly salvaged thanks to good preparation and advanced funding, Eternia and its surrounding Ralgonese territories weren't as fortunate. Depending heavily on tourism and trade from Eura, the economy suffered when the rest of the continent experienced recession as well. While stimulus measures were applied here, the polar country's own economic woes would be considerably longer-lasting than faraway Haifa. It would take at least a year for the local economy to fully recover, and longer for its central treasury to fill its coffers due to fresh debts owed to the central government in Gondolin.

Export-oriented industries

Export-oriented industries across the affected nations were severely impacted by the collapse of Normark and Anahuaco. In Nouvelle Alexandrie, manufacturing output dropped by 15%, with luxury goods and high-end electronics sectors being particularly hard hit. Oportia, with its greater reliance on exports, saw even steeper declines in its export-oriented manufacturing sectors. Natopia's export industries, while affected, showed more resilience due to the country's diverse trading partnerships. The Imperial Federation saw a deep recession in 1736 AN in its territory in Haifa and Eternia, and while this had knock-on effects elsewhere, the military recovery in relatively short order ensured that this recession was short-lived.

The Port of Wechuahuasi in Santander, where unused freight containers are piling up as trade plummets.

The Port of Wechuahuasi in Santander, Nouvelle Alexandrie, once a bustling hub of international trade, saw activity plummet by 30%, with unused freight containers piling up as long-distance trade routes with Normark and Anahuaco abruptly terminated.

Domestic consumption

Domestic consumption patterns varied significantly across the affected nations. Nouvelle Alexandrie exhibited unexpected resilience in this area, with the Retail Sales Index rising by 4 points to 112. This was largely driven by middle-class spending power, which was maintained through wage growth that outpaced inflation. In contrast, Oportia saw a sharp decline in domestic consumption as rising unemployment and economic uncertainty led to decreased consumer spending. Natopia's domestic consumption remained relatively stable, helping to offset some of the losses in its export sectors.

Labor markets

The recession's impact on labor markets varied across the three nations. Nouvelle Alexandrie's unemployment rate rose to 3.9%, representing a significant increase from pre-recession levels. However, this was moderated by the resilience of domestic-oriented sectors and government job creation initiatives. Oportia experienced the most severe labor market disruption, with unemployment reaching 5.2%. This high rate reflected the country's struggle to reallocate workers from declining export-oriented industries to other sectors of the economy. Natopia saw a more modest increase in unemployment, rising to 3.3%. This relatively lower impact was due to the country's more diversified economy and its ability to maintain stability in domestic-oriented industries. Across all three nations, youth unemployment emerged as a particular concern, with rates significantly higher than the overall unemployment figures.

Financial markets

Financial markets in all three countries experienced significant volatility and decline, though to varying degrees. Nouvelle Alexandrie's stock market saw a 15% decline, while Oportia's market plummeted by 22%. Natopia's stock market proved the most resilient, with a 10% decline. Bond yields and currency values also fluctuated as investors reassessed risk in light of the changing economic conditions. Central banks in all three nations responded with interest rate cuts, with Nouvelle Alexandrie's Federal Bank lowering the Federal Funds Rate to 2.25%. The recession also led to increased scrutiny of financial institutions, with multiple class-action lawsuits pending against banks and investment firms accused of exacerbating the economic crisis through risky lending practices or inadequate risk management.

See also

• Economy of Nouvelle Alexandrie
• Economy of Oportia
• Economy of Natopia
• Economy of Constancia
• Economy of Zeed
• East Keltian Collapse