What is a recovery gap?

A recovery gap refers to the difference between the level of economic activity or performance after a recession or downturn and the level that would have been achieved if the economy had continued to grow at its pre-recession trend. It highlights the shortfall in recovery, indicating that the economy has not fully bounced back to its potential output. This gap can persist for years, reflecting ongoing challenges in labor markets, investment, and consumer confidence. Addressing the recovery gap is crucial for sustainable economic growth and stability.