Tag: recession

These financial moves can help you prepare for a recession

A recession is inevitable for any economy that faces an immense decline. This fact can be scary for people who have experienced it before, and those who haven’t.

What is a recession?

Put simply, a recession occurs when the economy shrinks in the gross domestic product (GDP) for two consecutive quarters. It brings with it fear, uncertainty and extreme conditions of poverty for the country’s citizens. And, although we know that recession is bound to happen – anywhere in the world – we never really know when it will take place, how severe the conditions will become or how long it will last.

This opens the door for a myriad of speculations to being formed and perpetuated, causing chaos in their wake. As governments continue to fight the current pandemic caused by the coronavirus, also known as COVID-19, fears of the global recession are intensifying.

Many experts are expressing uneasiness about the severity of the impact of the coronavirus on the global economy. Unfortunately, the recession in South Africa is already in full swing. This happened after the gross domestic product (GDP) declined by 1.4 percent in the last quarter of 2019, according to Statistics South Africa (StatsSA). The question about whether the coronavirus will deepen the recession hole for South Africa remains an answered one. Experts warn that it is a futile exercise to try to do the guesswork.

But it doesn’t mean that you should sit back and wait for a deeper plunge. While it might seem all too late, it isn’t; you can still prepare yourself the best way you can. Below we’ve compiled a list of tips on how you can prepare your business for a recession.

Reassess and rework your business goals

This new reality calls for a big reflection and assessment of all of your short-term and long term business goals. Consider what the change means for your business’s finances, and rearrange your goals to fit the new circumstances. For example, if you were planning to buy new equipment, it would be wiser to relook at this goal. If you were looking to buy any of the equipment because you simply wanted to upgrade, then postponing it for later – when things have become better – might not be a bad idea. In essence, look into your business wants and needs, and rearrange them according to what your business needs right now.

Create a business essentials budget

Budgeting is important even under normal circumstances, but it is even more important now during these difficult circumstances. Your company’s accountant needs to reassess and rearrange the business’s budget to fit in only essentials, as we’re only allowed to purchase essentials. That refers to food, toiletry, medical and health-related items, but also items that help run a business efficiently such as laptops. There are also several online business budgeting tools available in South Africa to help with managing your business budget better.

These tools can be a healthy addition to the balance sheet you normally use. It can help you with your business’s financial planning and give you an overview of your business account(s), investments and history of transactions.

Build up business savings

If your business is in a position to continue building up savings, do that. If you have not started a savings account, perhaps it’s time you start to fix that and open one. Asking any business to save their money during these tough times can sound ridiculous, but every little bit helps. You will need the money for unplanned expenses or business emergencies. You will also need savings for future projects that might become a valuable addition to your business, or kick-start old ones that you might have put on hold due to financial implications.

Pay your debts

Again, if you’re in a position to continue paying off your business’s debts, do not pause any of these payments. The more you hold off on paying, the more the interest rates will soar. It’s possible that by the time you start paying again, you’ll be overwhelmed. Paying off your debts will also give you peace of mind; should things get worse or should company take a knock, you’ll feel at ease knowing that you’re not too behind with your debt payments. Even If you’re secure about the future of your company, you still need to continue to pay your debts as it impacts on your company’s credit health.

Apply for financial relief

We just told you to pay your debts, but now we’re talking about taking on new debts, why? Well, business is in a complicated situation, and the state of affairs is not exactly the same for everyone. If your business is managing financially, it makes sense to steer clear of a new financial obligation, but for some businesses, financial relief is the only option they have.

For example, small businesses have either permanently or temporarily shut down, and some are working remotely. Some of these active businesses have had to cut down money spending to focus on priority areas. And, while the government has offered some relief to these groups of small businesses, there’s still a huge demand for financial relief. This is where corporate finance comes to the rescue. Corporate finance deals with providing money to businesses. What’s important here is to assess your risk appetite and tolerance. You can have a conversation with an expert who can guide you through this process and help you find out if you qualify for corporate finance, as well as where to apply for corporate finance.

Take control

Some things in life are within your control, and a recession is not. A country can work collectively to boost up the economy to try and avoid recession. However, it’s inevitable and can take place at any moment, should a country’s economy take a slump in two quarters consecutively. The best thing to do is to shift focus on things that are within your control. The above financial tips can help you take control and weather the storm as the fight continues.

US birthrate hits all-time low

baby2The recession has been over for four years, but the birth rate in the U.S. continues to fall as many people struggle with a sluggish economy and financial uncertainty.

According to a recent analysis by the Pew Institute, since 2007 when there were a record 4,316,233 births, the number of births has been steadily declining, with 4,007,000 births in 2012 – the lowest number since 1998.

Analysts say that the birthrate is dictated by the economy.

‘When times are up, births go up,’ D’Vora Cohn, a senior writer at Pew Research Center, told Today. ‘When times are bad, births go down.’

Despite the recession being officially over for four years, the weak recovery and economic uncertainty has resulted in the national birthrate hitting an all-time low in 2011, and staying there in 2012.

There were 63.2 births per 1,000 women aged 15 to 44 in 2012, according to the Center for Disease Control, down from 69.3 births per 1,000 women in that age bracket in 2007.

The connection between the economy and birthrates generally holds true, but there are often other factors at play as well.

According to Jonathan Last, author of ‘What to Expect When No One’s Expecting: America’s Coming Demography Disaster,’ for decades the national birthrate has been generally much lower than during the Baby Boom years of the ’50s and ’60s.

He says that factors such as higher education levels have seen women giving birth later in life and sometimes having less children overall.

‘It’s going to be fascinating to see,’ Last told Today. ‘Did the recession just exacerbate trends, or did it really put its thumb on the scale and move people into depressing fertility rates?’

Some couples are missing their window of opportunity to have a baby because they never feel financially secure enough to commit to having a child.

The U.S. Department of Agriculture estimates that a middle-income two-parent family will spend $234,900 raising a child – not including college.

For many middle-class people, parenting in the way they want – including all the trappings of a new baby such as Bugaboo prams and expensive classes and childcare for older children – is a costly and sometimes unaffordable task.

For lower income people, the expense of a baby could push families below the poverty line.

The birthrate among single women dropped substantially, as did the rate for young women in their teens and early 20s.

However, the birthrate actually increased slightly for older women in their early 40s, and remained the same for women in their 30s.

Experts say the reason for this is that older women are generally more financially secure, and for women in their 40s, the ticking of a biological clock is often louder than economic concerns.

‘The net effect in the past has been that you had about the same amount of babies… but they were just born a little later,’ Cohn told Today.

However, with the weak economy, the different ways women are thinking about parenthood and the general trend towards fewer births, it’s unclear whether the numbers will be made up this time.

‘History teaches us that there will be a bounce back. But whether it will be a full recovery, I don’t know,’ said Cohn. – Daily Mail

Britain heading for ‘triple-dip recession’?

Recession may just be a word. But in Britain it may become a habit – and a dangerous one at that.

It’s possible that official figures on first quarter economic growth, to be released Thursday, could show the country is back in recession, and tension is building.

Although economists on average expect growth of 0.1 percent on the quarter, they warn it would take the smallest statistical variation to put the figure in negative territory. That would place the country in recession, typically defined as two consecutive quarters of economic contraction.

Another recession – the third since the 2008 financial crisis – is already being referred to with foreboding in the media as a “Triple Dip.” Experts warn that its confirmation would create a wave of negative media attention that would scare consumers away from spending, feeding into a vicious cycle that has the economy flat-lining.

“It’s psychological – this is all psychological,” said Cary Cooper, a professor at Lancaster University Management School. “It’s about the message that those figures send to consumers and small businesses.”

The government desperately wants a strong number to justify its increasingly criticized policy of painful spending cuts. But recent indicators on Britain’s economy, the third-largest in the 27-country EU after Germany and France, have been disappointing.

Inflation is rising faster than wages, cutting into people’s standard of living. Unemployment is up at 7.9 percent. Two international ratings agencies have downgraded the country’s credit grade from the top level AAA, warning about the government’s fiscal policies.

The government, which has long played on its AAA rating as a sign of its economic might, has been pursuing a harsh program of spending cuts and tax increases to reduce the budget deficit, which at 7.4 percent of annual economic output is more than twice the EU’s 3 percent limit. Like many governments across Europe that have been scarred by the bond market turmoil that forced Greece and four other countries to need rescue loans, Britain is focusing on reducing debt quickly, even at the cost of short-term economic pain.

What some governments and economists are slowly realizing, however, is that they may have underestimated the damage such austerity would do.

There’s long been pressure domestically in Britain to ease off the budget cuts, but in the past few days the International Monetary Fund also chimed in. The fund, whose views carry weight as it is involved in all of Europe’s sovereign bailout programs, has pressured Treasury chief George Osborne to slow down the austerity measures in hopes of reviving the economy, whose output was worth 1.4 trillion pounds ($2.1 trillion) in 2012.

As the austerity debate rages on, no other person than the national spiritual leader – the Archbishop of Canterbury, Justin Welby – has waded in and used a word no want wants to hear: Depression.

Welby has unusual standing in the world of money because in a previous life he served as an oil industry executive and now sits on the parliamentary banking standards committee. He told an audience at the heart of government in Westminster on Monday that there was an issue of confidence and trust – and there is need to rebuild both.

“I would argue that what we are in at the moment is not a recession, but essentially some kind of depression and it therefore takes something very, very major to get out of it in the same way as it took something major for us to get into it,” he said.

The Bank of England has cut its interest rate to a record low 0.5 percent and pumped money into the financial system in the hope that will encourage banks to lend money more cheaply. But the results have been mixed and experts say there is only so much a central bank can do to create jobs.

On Wednesday, the Bank of England and the Treasury extended until January 2015 a program to boost lending and help the economy. The program offers funding at low interest rates to banks on condition that those rates are passed on to small businesses and households. Its results so far have been mixed, however.

Even if the economy dodges recession, the daily reality for many Britons remains tough.

The Trussell Trust, a food bank network, said it fed more than 350,000 people in the year ending in March – more than double the 128,000 served in the previous 12-month period. Tim Boyce, a retired investment banker who runs a south London branch, said he’s seeing the people behind those numbers. Inside a frosty church that’s opened its doors to the desperate, he watches as they come for emergency handouts of rice, pasta and beans.

“Most people don’t realize the extent of poverty,” he said as he sipped coffee to keep the edge off the chill. “It’s hiding in plain view.”

Take the cases of Kevin Bishenden, 50, and his wife, Nicola, 40. He’s an upholsterer who says that no one wants to hire someone his age. She says she just can’t find work. The only reason they aren’t homeless is that Britain’s welfare state manages to keep a roof over their heads.

But they’ve slowly been shedding all their possessions, together with memories of a past life. First a bike, then stuff from the kitchen. All the DVDs are going, though even Star Trek only gets you a few pennies. They’ve already sold their wedding rings.

He lamented a new council tax payment of 15 pounds ($22.80) that came into effect as part of government austerity plans. His exhaustion was plain as he tried to imagine paying for it.

“Where’s that supposed to come from?” – AP