What can we do to avoid the consequences of recession? Can we cushion the blow? In this detailed article, we will try to find some answers on Recession 2023.
Recession 2023: Economies all over the world are contracting, economic forecasts are shrinking, Layoffs are growing at an alarming pace, and Hopes of a rebound is non-existent. Grim surveys are coming out every day accompanied by volatility in the stock market and the rising price of goods and services.
Are we heading towards recession? Should you rather save for the future or indulge in the joy of the season? This is the dilemma many people are facing. If these are the signs of recession, what can we do to avoid the consequences of recession? Can we cushion the blow?
What is a recession?
It is an economic downturn in financial activity. It is a period when a country’s the economy stops growing. A common thumb rule is a decline in the GDP (Gross Domestic Product). If it declines for 2 consecutive quarters or half a year, you are
in a recession.
This is what is happening currently mostly in the western world. The United States, Canada, the United Kingdom, and the European Union along with Australia, Japan, South Korea, and China. All of these are plagued by economic crisis. The world’s 3 largest economies are headed towards a recession: Recession 2023. They could dip into it anytime in the next 12 months.
The reasons are as follows:
- Tightening monetary policies
- The rising cost of living
- High commodity prices
- Tense financial conditions
These facts could push these countries into a synchronized growth slowdown.
“Once they fall, these countries will drive the entire global economy into recession”, said the World Bank.
The United States is edging towards recession. It is still the world’s largest economy, the largest importer of goods and services, and accounts for a quarter of global GDP.
Therefore, it plays a dominant role in the global financial market. So, what happens in America doesn’t necessarily stay in America only. As per research, all previous global recessions have coincided with sharp slowdowns or outright recessions in the USA. From there it spread to Europe. This time the EU is already at risk of recession. It is bracing for a grim winter season, as growing costs are strangling its economy.
Which countries will face the biggest hit?
According to a Bloomberg report, Germany, Sweden, and the UK will suffer at least three months of contraction. The UK is already in recession technically. The country’s economy has been shunned; economic output has fallen by 0.2% in Q3. The Bank of England said. “This recession period could last for more than 2 years. What is the UK doing to fix this?
The UK plans to raise taxes and cut down expenditures. “If you want to be more confident about the future, you have to be honest about your present”, said UK Finance Minister Jeremy Hunt. He further added, “You have to have a plan and This is our plan to control inflation and high energy prices.” For the record, this is happening in the 6th largest economy in the world. One can only imagine how third-world countries manage to face this, if a similar situation hits them.
For instance, South Africa’s economy is likely to be in a technical recession too. Their GDP contracted to 0.7% in the second quarter. The economic growth outlook has slipped to 2%. In Argentina, the rate of inflation has climbed to 83%. Its complex web of rules and taxes are further just adding to the cause. The tale repeats itself in Tunisia. The country is facing economic stagnation with skyrocketing rate of inflation.
In Egypt, the debt-to-GDP ratio has risen to 89%. According to surveys, there are more than 15 countries that are under the radar of the economic crisis including Ghana, Ethiopia, Kenya, Nigeria, Sri Lanka, Pakistan, El Salvador, Ecuador and Belarus. They are all going into an economic storm and are unlikely to come out soon from the whirlpool.
The International Monetary Fund said that the global economic world outlook looks gloomier than earlier. The economic indicators further point towards more challenges mainly because of:
- High rates of inflation.
- The weak growth momentum in China
- Pandemic induced slowdown
- Russia’s invasion of Ukraine
These all contribute to lowering global economic outlook further. Therefore, all these issues need to be addressed on an urgent basis.
Where does India stand in this mess?
An analyst said, for now, India is not really at the risk of recession. There are a host of factors responsible for this.
1. India has lower debt compared to the rest of the world.
2. India has a demographic advantage: When the rest of the world is expected to have an ageing trend, India will continue to have a high share of the working-age population.
3. Investments: India witnessed large flow of investments mainly after the Pandemic. When economics began hiking interest rates making it expensive for the investors to make their bets, this made them turn to India. All these factors combined could help India avert a recession. A Moody survey said, “India, as well as other economies in Asia pacific region, are expanding due to their delayed reopening from pandemic shutdowns. Due to this, a recession is not expected in the APAC region. But it will face headwinds from higher interest rates.”
Not everybody can escape the storm of recession 2023 especially if you happen to be living in a country at risk. How will this recession impact your finances? As per a survey, consumers have to spend 6.7% more during this holiday season compared to last year. Recessions also lead to drops in output and investment along with falling profits for businesses and a spike in unemployment. 1. Unemployment
1. Unemployment
In Every recession the unemployment rate tends to rise as the companies cut back on staff to reduce their expenditure. You might also be at risk of losing your job or may experience a pay cut.
Read more- Mass layoffs: Why tech firms are firing thousands of employees
2. Difficulty switching jobs
Job openings may also impact severely and if there would be any, the competition is likely to be tighter. So, gear up for some hustle. No wonder tends as moon lightening emerges. People decide to hook up in a secondary job too for career cushioning. People are now looking for options and a backup plan to add a sense of security to their professional lives.
3. Cost of living
While inflation contributes to the recession, you may find that household essentials like groceries, gasoline and clothes are more expensive than they used to be. Higher prices will make it harder to meet the ends. Therefore, you may have to resort to stringent budgeting and cut out discretionary spending. How to deal with this coming and ongoing recession?
1. Start saving: Remember how our elders told us to start saving for a rainy day? The downpour is coming and it’s high time you should start saving up for it.
2. Arm yourself with information: Read up about recession, especially this article and share it with your friends and family who are living in the recession-struck countries. Learn about what will get costlier from groceries to your OTT subscriptions. It is all a vicious cycle. See if you can live without them.
3. Add more value to your professional resume: The job market is going through a flux, layoffs are the talk of the town, and recession-proof careers are trending. Why can’t you make your job recession-proof? At least, you can make your resume more attractive instead of quitting quietly, moonlighting or career cushioning.
There is also a theory that believes that the sale of lipstick and men’s underwear can predict a recession. Surprised! Well, we will discuss it later. For now, what are your thoughts on compact recession and inflation?
