Economists expect a recession in 2023, largely due to the high interest rates that central banks around the world have pledged to combat inflation.
Writer Walid Hijazi says - in a report published by the Spanish newspaper "Atlayar" - that "the definition of recession is: the phenomenon of negative growth in GDP over two consecutive quarters, but basically: a period in which economic growth declines significantly and rises in unemployment rates.
Since there is no precise definition, there is not always complete agreement on whether the economy is in a recession or not, but the current cost of living crisis is causing many to wonder: When will the next crisis begin?
hyperinflation
Inflation has risen to levels not seen in 4 decades, and it is clear that high inflation rates have a negative impact on purchasing power, and make it difficult to acquire basic necessities such as food, and inflation has a negative impact on economic efficiency, which leads to lower overall growth.
And when interest rates rise, it becomes more expensive to finance larger things - such as cars, homes and vacations - as any purchase that requires financing becomes more expensive when interest rates rise.
In addition, when current debt has variable interest rates, the cost of holding it also increases, and as a result of these increases the demand for many goods and services decreases, and inflation also decreases in the long run.
What happens in a recession?
During a recession, companies are forced to reduce hiring, lay off workers and reduce working hours. Most of the job losses are concentrated in the service sector, especially on digital platforms, where profits tend to fall and employment is unstable.
Loss of income means that people have to turn to their savings - assuming they have savings - to pay for necessities, such as food, housing and transportation.
Thus, the possibility of losing a job or reducing working hours is the biggest impact of the recession on families, so most people should prepare for such a situation.
How do you prepare for that?
With the threat of recession, many families are concerned about the state of their finances, and in anticipation, Hegazy highlights some tips you can follow to prepare for it:
Reduce expenses immediately
Take the opportunity to review your budget and reconsider the daily spending habits that you accumulate.
For example: Revisit the meals you take out, or the transfers that automatically leave your account each month.
In summary: rationalization and consideration of spending habits.
Pay off your credit card debt as soon as possible
It is important to pay off credit card debt as much as possible and as quickly as possible.
In the coming months interest rates will continue to rise, which will make debt management even more difficult.
In this context, lower debt balances allow for a lower level of interest payments, making it easier for you to get through financially difficult periods.
Pay close attention to bill payments and avoid late fees
These fees also accumulate over time, so it would be advisable to develop a plan to ensure that bills are paid on or before the due date, knowing that late bill payments lead to financial penalties that should always be avoided, especially during a recession period.
Prepare to lose your job and look for another
Make sure your resume is up to date and that you are ready to look for a new job in case you lose your job, and be prepared to find another one soon.
Make yourself more employable
Since downturns tend to affect less experienced and less educated individuals, keep your knowledge up-to-date on the job.
Therefore, explore virtual options that allow you to upgrade or in-person offers through colleges and universities to enhance your education and develop your skills.
Try to get a job that is not affected by the recession
The most recession-resistant jobs depend on skill levels, but they tend to be in the public sector, health and education, and these jobs aren't for everyone.
For this reason, each person should consider options that best suit his abilities and preferences.
In general, this strategy is most successful when your skills and resume are up to date and you are well prepared.
Make sure your CV is up to date and that you are ready to look for a new job in case you lose your job (Shutterstock)
Plan for the worst, but hope for the best
Some of these strategies are easier to implement than others, but perhaps the greatest lesson of all is to always prepare for the worst.
The writer pointed out that recessions or economic downturns are part of the so-called business cycle that describes ups and downs in the economy, and recessions usually occur once every decade and sometimes more.
And he stressed - at the conclusion of his report - the need for people to try to be prepared for such a recession instead of waiting until the last minute, because the closer one gets to an economic downturn, the more difficult it is to prepare for it well.
"Even if you plan ahead, living in a recession can be scary, but the good news is that it doesn't last forever, and all we can do is plan for the worst and hope for the best."