The world has changed enormously in the three months since the last update of the World Economic Outlook in January. A rare disaster, COVID-19 has spread rapidly around the world. This pandemic will cause a global recession in 2020 that could be worse than the one triggered by the global financial crisis of 2008–2009. The catastrophic effect of the coronavirus is rippling its way through economies, destroying businesses, and crippling economic growth. But what exactly is a global economic recession? And what can you do to overcome it?
What is the Economic Recession?
Economic Recession is a period of general economic drop and is commonly accompanied by a higher unemployment rate, wages that do not go up, a downturn in the stock market, the housing market and other investments. In other words, a country’s finances aren’t growing, they’re freezing. When most people or businesses in a country abruptly stop spending as much money as they usually do, a decreasing spiral kicks into gear. Let’s see what happens next:
When consumer spending reduces, businesses adapt their strategies. This means they hire fewer people, cut back staff temporarily, and purchase fewer supplies from other businesses. The unemployment rate becomes larger and consumer confidence drops down fast. At this point, a vicious cycle is in full swing and things become worse.
Is a recession coming?
While leading economists around the world have been predicting an economic recession for several years (the economy dips about every 10 years). Since the Coronavirus pandemic and related global stock market plummets, specialist anticipated a recession around the globe will happen in 2020. Economists warned that stockmarket plunges were the beginning of the long-term economic recession.
The Impacts of Global Economic Recession ?
- Businesses cut down spending in an effort to increase or sustain profits, many go bankrupt.
- Rising unemployment: millions of people lose their jobs. College graduates will earn less than people joining the workforce before the recession occurs. Actually, the ones that have less education certificate and those that possess lower incomes will also affect considerably during a recession.
- People try to pay their debts, which damages their credit scores. This makes it harder for many to borrow money in the future which in turn contributes to more economic stagnation.
- Business investments go down and it becomes difficult to start a business.
- Individuals, anxious about their jobs and investments, expend less on everything from food to new homes and cars, and discretionary goods like travel, gifts, home furnishings, electronics, and cloth
- Governments have less tax revenue to make an investment in their communities.
- The stock market, government debt, and home prices all continue to are damaged by these economic pressures.
- Decreasing in export revenues: the global economic recession will affect especially with developing countries due to lower demand and falling prices for commodities, including the demand for manufactured goods.
- Global tourism demand will decline immensely during an economic recession.
Businesses Thrive During Recessions
Recessions are hard times. Many people have affected negatively but for a select group of professionals, an economic recession may actually be a good chance to thrive and grow. Here are some businesses that tend to do well in a recession:
- Healthcare Providers: During any economic recession, everyone still needs to taking care of health. However, as this recession is caused by the coronavirus, it is certain that healthcare providers will see an increase in demand.
- Financial Advisors and Economists: With dramatic changes to the economy, many people will need financial orientation. This means that financial service suppliers such as accountants and financial advisors may keep unaffected.
- Grocery Stores: Economic instability cause less splurging, leading to less eating out. With more people cooking at home, that means grocery stores will increase the sale
- Bargain and Discount Stores: People cut back on luxuries during a recession but that doesn’t mean they never shop anything that isn’t strictly necessary. Many people look to economize a few extra dollars wherever they can, which means the bargain and discount stores will increase sales. People who otherwise never step into a dollar store rethink their spending habits when a recession hits.
- Auto Repair and Maintenance: Rather than purchase something new, buyers choose to repair things that break during an economic recession. This may lead to making repairs to a high-mileage car rather than buy it or calling a repairman out to work his magic on a tired old furnace.
- Do-It-Yourself Suppliers: People will give up the cost of hiring a building contractor and take on home improvement projects themselves. So the company provides tools and do-it-yourself supplies that will boost sales. Also, site guiding do-it-yourself skills might also see an increase in traffic.
- Computer Systems Design and Services: The growth of automation and internet services has changed the business environment. This industry refers to designing, building, or implementing software and hardware. During previous recessions, there was already a steady increase on the internet. This increased computer systems design and services, which had to deal with the rise in demand.
How to Overcome The Economic Recession
Thankfully, you are not alone in this disaster. Besides, recessions are nothing new. Humans have survived recessions since the dawn of humanity when our ancestors survived droughts or the 2008 housing crisis. Take a look some practical steps today will protect you and your family if and when the economy takes a turn for the worse
1. Prepare emergency savings
Unemployment is inevitable during an economic recession and this means you will have a tricky time paying your cost of living without suitable emergency savings. You might think that you still have a long way to go, but the money saved will make it possible for you to meet your needs. It is best to increase your emergency savings for up to three to six months’ worth of spending.
2. Pay off debt
Debt is trouble even when the economy is healthy. But it’s an even serious problem during recessions, when you may be facing the risk of losing your job or suffering a serious decline in the value of your investments. Try to reduce your debts, pay off or pay down as many as you can. Less debt and more responsibility can lead to smarter money management and stress-free financial life.
3. Live below your means
To keep healthy finances, it’s important to live below your means. If you spend over you earn, the debt you incur could land you in hot water during an economic recession. It’s a great idea to build a monthly budget and track your spending.
- 50% on necessities, such as housing, groceries, utilities, and health insurance.
- 30% on wants, such as shopping, dining out, and hobbies.
- 20% on provision for future, such as emergency savings, a college fund, or retirement plans.
4. Additional income
Each one of us employees knows that retrenchment is possible and what’s the best way to survive is having an additional side income to support your cost of living during a recession? You can do any additional income that pays well ranging from online businesses, a driver for rideshare services, and many more. Here are six potential side hustle ideas you could start today:
- Start a dropshipping business
- Begin freelance writing
- Become an affiliate marketer
- Be part of the gig economy on sites like Upwork or Fiverr
- Start and monetize a blog
- Become an Instagram influencer
5. Keep Investing
If you’ve been stocking up on cash, you’ll have the money available to invest in the market. That’s more crucial in recessions than ever because you can buy stocks at depressed prices. Among some of the valuable investments during these times that you can regard investing in real estates such as land or apartments. Prices of properties remain lower as there is a lower demand prevailing in the economy. Smart investor opts for property investment during this phase as the value will make a profit over time, even in an economic recession
6. Create Your “IA’s”- Intellectual Assets
Even if you can’t afford to pay down your debt or increase your savings, try to develop your skills and qualifications. If an economic recession is coming, one of the very best plans to keep yourself relevant on the career front is to enhance your abilities. That might mean taking an advanced degree. But it can also mean joining an online course or getting a crucial certification — anything that could support your career moves forward. In summary, you’ll be doing whatever you can to enhance your value in the job market. In the process, you may get ready for a new job or even a whole new career.
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Conclusion
We are going into a global recession. And, the economic recession damage is going to last. But it isn’t time to panic. Instead, focus your time, effort, and energy on doing what’s needed to thrive to prosperity, even if the economy goes down. In the end, the next recession will only be temporary. You can take steps to develop yourself to prosper when it ends.
