The World Bank warns that the world is entering a 2023 global recession. This period refers to protracted and weak economic growth and rising inflation. In 2022, the World Bank cut its global growth forecast by 1.2 percent from the original 4.1 percent to 2.9 percent. See the following information to find out information about the 2022 global recession and its impact on business continuity!
What is a Global Economic Slowdown?
A global economic slowdown, also known as a recession, is a prolonged period of economic downturn worldwide. A global slowdown involves more or less synchronized recessions in many national economies. This is because trade relations and the international financial system send economic shocks and recession effects from one country to another.
A recession marks a severe downturn in economic activity that causes financial turmoil in the economy. A recession can affect other countries due to trade connections worldwide when extended over a longer period. In addition, the internationally controlled financial system also affects global players when they contact each other during a recession
Causes of the Global Economic Slowdown
Various factors could lead to the 2023 global recession, including, but not limited to, falling asset prices, falling energy and commodity prices, dry demand, reduced consumption, reduced wages, the onset of war, and a general decline in consumer and investor confidence.
According to the International Monetary Fund (IMF), a decline in the annual gross domestic product (GDP) per capita can also lead to a recession. However, a worsening GDP can only lead to a global economic crisis if accompanied by a significant decline in economic factors, such as trade, production, per capita exchange, and transactions.
The National Bureau of Economic Research lays out several factors to determine whether a country is slipping into recession. These factors include inflation-adjusted real income, employment, manufacturing, real GDP, and inflation-related retail sales.
The economy is said to be active if these factors are efficient and show no signs of slowing down. Otherwise, there is a possibility of a recession.
Impact of the Global Economic Slowdown
The global economic recession led to high unemployment and falling wages. Employee layoffs are carried out when the company tries to save itself from further losses. As a result, higher unemployment and lower salaries force consumers to hold back on spending, further increasing the slowdown’s impact.
In addition, investors also hold investments and sell existing investments, causing the price of risky assets to fall. As a result, financial institutions face widespread defaults, sometimes leading to bankruptcy.
How is the Economic Condition in Indonesia?
While other countries are predicted to experience a recession, economic indicators in Indonesia are still good. Indonesia’s economic growth even increased from 5.3% to 5.9%. Indonesia’s economic growth in 2023, targeted at 5.3% to 5.9%, reflects optimism and vigilance because, in 2023, global uncertainty has the potential to be higher.
Global uncertainty can be seen in international financial markets where the US central bank, The Fed, will raise interest rates again to reduce the risk of rising inflation. Indonesia has prepared many strategic steps to maintain the economy and society in addition to defending the health of the state budget.
What Should Businesses Do under These Conditions?
During the 2023 global recession, businesses should keep from running out of cash, as recessions typically trigger lower sales and less money to fund operations. Surviving a recession requires agile financial management.
There are various ways to prepare for the impending global economic recession, including having additional income and an emergency fund (which can be withdrawn when needed), investing in long-term plans, and having a diversified investment portfolio. Everyone needs to be prepared to tolerate the risks of a global economic recession.
This is information about the 2023 global recession and its impact on business continuity. For those of you who are currently building a business, use Skha services which provide Business Design services to help formulate solutions to complex problems faced by organization, including the impact of economic conditions on a business.
The Skha team will conduct a thorough analysis to ensure you can anticipate future issues. Visit Skha’s Business Design page for more information!