This is in addition to the strong changes in the labor market with the wave of downsizing underway, and parallel to the low access to finance, in addition to the crises faced by large sectors such as real estate and other sectors.
According to the latest reports from the World Bank, global growth has slowed sharply and the risk of financial stress has increased in emerging markets and developing economies amid rising global interest rates. According to the latest World Bank Global Economic Prospects report.
Global growth is expected to slow from 3.1% in 2022 to 2.1% in 2023. In emerging markets and developing countries other than China, growth is expected to slow to 2.9% this year from 4.1 % Last year.
The specter of the recession still hangs
In such a “suffocating” atmosphere, when a state of “uncertainty” dominates the world economy, what can people do to avoid the effects of a possible recession that is still looming on the horizon, a Moderate Recession or a Severe Recession??
Of course, the answer differs depending on the nature of the economic situation specific to each country, but in general, a set of general precautionary measures are generally recommended in the face of one or another of the scenarios associated with the specter of economic recession.
A professor at the University of Massachusetts at Lowell who specializes in strategic planning and business development, Scott Latham, provides a set of general ideas about the economic recession and how it affects people’s lives and also provides a set of recommended tips for coping during recessions for individuals and institutions and talks about the US scene as the world’s largest economy and how it looks in light of these threats:
People need to be aware that a downturn in the economy is possible, with direct repercussions for them. The equilibrium in the labor market is likely to shift from the employee to the benefit of the employer, or at least to return to equilibrium, which strongly and directly affects the company. People need to be smart in their career decisions (stick to work as much as possible). Unfortunately, as interest rates rise, many factors such as house prices and mortgage rates will be “out of control”. People should start developing skills towards new emerging technology. There is usually a sharp increase in economic activity after a recession. “Be prepared and have marketable skills.”
Conflicting economic indicators
In light of the conflicting economic indicators as to whether or not there will be a recession in the near future, Latham says, “Looking at the recent economic outlook for the United States, I’m not inclined to say that a recession is likely here, however, I am aware that other regions, such as Central Europe, North Africa, and Southeast Asia, are likely to experience an economic slowdown.
The technical definition of a recession is that it means a contraction in economic activity for an extended period, usually up to two consecutive quarters.
However, the American academic points the finger, at the same time, “the instability of the economy at the present time”, which leads to the difficulty of determining a specific part of the economy that is in a state of balance. The US economy right now is like a snowball being shaken around, as the snow flies, then it settles.
In general, he explains that in light of these conditions, consumer confidence, business investment, and job creation are not just in a state of fluctuation and change, but rather in a state of contradiction. , meaning that these elements are in conflict and rivalry. . Therefore, this indicates that the current economic signs are difficult to understand and read correctly.
Thus, the American academic points out that:
An economic recession is structural, meaning there is a problem in the underlying economy that exacerbates the situation due to uncertainty. For example: the great recession caused by the speculative mechanisms of the real estate market, and the recession experienced by technology companies (in the early 2000s) due to the speculative business models of this sector. In both cases, there were negative economic fundamentals, which makes the situation unstable, after which the human factor enters illogically and increases the state of panic and uncertainty in the economy. In general, these two factors – negative fundamentals and irrational human behavior – combine to trigger an economic recession, the threats of which are avoidable.
As for the current situation, he points out that the threats of the current economic recession could have been avoided if different measures had been taken, pointing out that the scale of the economic stimulus that has been implemented due to the Corona pandemic ( which is the case for many governments around the world is part of the measures taken to protect the economy during the pandemic), in addition to the low-interest rate policy pursued by the American Central Bank over the past decade, has contributed to rising inflation in the United States. With interest rates currently raised and future increases expected, institutions and businesses are concerned and are beginning to reduce their investments in equipment, labor, and the like.
Regarding the American case, the professor from the University of Massachusetts at Lowell also blames the current American administration led by Joe Biden. This is because he injected a large amount of money into the economy and he did not follow the advice of economists who warned him against this. He thinks these broad monetary and fiscal policies may have contributed to higher inflation and increased market volatility.
And he continues: The US economy was addicted to cheap money (referring to low-interest rates) and was not sustainable. I’m amazed that we made it this far without feeling any pain. Then the Corona pandemic hit the world, and here we are now in a state of imbalance and it was a once in a lifetime pandemic, but we would have been better off if we had raised interest rates over the last decade.
Last Tuesday, Goldman Sachs downplayed in a research note the possibility of Washington entering a recession within the next year and said those possibilities “have fallen below expectations,”, especially after the decision to raise the debt ceiling. On the other hand, Bloomberg quoted JPMorgan CEO Jamie Dimon last week warning of what he described as a “big, imminent economic risk” and said that given those risks, “I accept a recession”.
The impact of the recession on people’s lives
And depending on the possibilities of a recession looming on the scene, the University of Massachusetts Lowell professor speaks in his statements to “Sky News Arabia Economy” about the impact of these economic conditions and conditions on the average citizen, saying :
People with middle and low incomes will feel the impact of the economic recession more than those with higher incomes. The biggest impact will be on job opportunities; The labor market will shrink in the coming months and wages will start to fall, making the personal economic situation of these people more difficult. Signs are beginning to appear of job cuts and mass layoffs. Some geographic areas will be more affected than others.
Regarding the impact of certain regions, an example is inferred from the United States of America, where Boston, which has a diversified economy based on various sectors such as financial services, health care, life and technology, may have a lesser impact compared to Michigan, which relies heavily on industries related to consumer products and the automotive industry.
In light of these data, and while the professor from the University of Massachusetts at Lowell, who specializes in strategic planning and business development, is not sure whether the American economy is heading into a recession or not, he expresses his desire to be optimistic, and after a difficult period in recent years, he does not want an economic recession or even a period of balanced inflation. He estimates that :
There is a huge explosion coming in areas of innovation, such as life sciences, artificial intelligence, robotics and information technology, and this will drive economic growth. However, some factors are working against this growth, such as political tensions, the repercussions of the COVID-19 pandemic and events in Ukraine. As a result, he expects a mild recession to occur, but he doesn’t expect a major recession like the one that happened in 2008.
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