Posted in Finance, Accounting and Economics Terms, Total Reads: 129
Definition: Negative Growth
Negative Growth is the decline in the economic growth of a country, region or business. It shows that the economy of a country has shrunk over a period of time. Negative Growth can be a result of many different factors.
There are various ways to determine the negative growth like Gross Domestic Product (GDP) of a country. For a business the share price of a company or its revenue can represent its growth. Negative Growth is a matter of concern to the authority. Negative Growth of a country can worry governments because it might have caused loss of employment, loss of business activity in the country. It is generally measured on year on year (YOY) basis or a quarter on quarter (QOQ) basis. When negative growth occurs in a country, various steps are taken by government and central banks to mitigate the impact like government stimulus or monetary injections into the economy. When negative growth occurs in a company steps like marketing of products, positioning of the products or company restructuring are taken. Negative growth also results in deflation of GDP of a country.
For Example: Suppose a country has a GDP of 300 trillion USD in the year 2015. Now in the year 2016 the country suffers from the impact of global slowdown and setback of commodity market. Owning to these factors the country results in negative growth and GDP of the country shrinks by 1%. Therefore GDP in 2016 will become 327 trillion USD. Hence one can say that the country has suffered negative growth of 1% between year 2015 and 2016.