The chief economist and senior vice-president at Scotiabank Economics, Jean-François Perrault the technical recession will hit in the first quarter of 2023. As a result, they expect the growth of the economy to slow down from 3.2% to 0.6% next year.
At PrestoCash, we have received several questions from our customers asking, “will there be a recession in Canada in 2023?” Every economic indicator is pointing towards a yes! So, what can you expect in a recession, and how can you deal with it? To find the answer to these questions, let’s understand recession.
What is a Recession?
A recession is a phase of business or a country where there is a sudden decline in economic activity. Generally, when a country witnesses two consecutive falls in its GDP, it signifies that it is leading to a recession. As a result, you will see a lack of business activity in the economy, which can result in job loss, higher expenses, and poor growth of businesses.
Effects of Recession
Job loss
This is the main impact of the recession. Many companies will start to lay off employees because of a lack of business activity. This will lead to lower job opportunities and a rising unemployment rate. For 2023, the unemployment rate will be around 1.7% on a quarterly average. You may have already heard the news of several MNCs laying off their employees.
Economic Growth Slows Down
When a recession hits, business around the country starts losing their sales and will have lower margins which will slow down the growth of a country’s GDP resulting in delayed bouncing back from a recession.
Inflation
Inflation refers to an economic condition where prices for every good and service rises. With the current condition, the rising cost of everyday goods and higher debt charges will rob straight $3000 from a normal household’s purchasing power. This change will mostly affect Canadian citizens on the lower wealth spectrum.
How to Prepare for an Economic Recession in 2023?
For more than a decade, the world economy has been expanding gradually. Many analysts believe it may slow down in 2023, though. Even if your business is expanding, the economy’s effects will impact it during any short-term economic slump because no industry is recession-proof. So what should you know while preparing annual recession plans for a potential economic slowdown? Are you and your team prepared to make difficult choices during strategic planning for the recession? Here are some tips to help you prepare for the upcoming recession.
Plan Ahead
Many investors started dumping stocks and bonds as soon as the Federal Reserve revealed its intention to significantly hike interest rates in order to slow the economy and control inflation. They were concerned that rising borrowing prices would make it more difficult for businesses to obtain loans and for people to purchase homes and vehicles. Moreover, according to some experts, if the Fed raises rates excessively, the economy may continue to deteriorate and enter a recession.
Brace Yourself
In addition to accumulating money, it’s important to have an emergency fund. Remember, cash is king, so it’s a smart idea to provide your company with a six-month cash flow runway. As the market becomes more competitive, you want to save money. Make sure to go through all of your major budget line items as well as all necessary outlays. Be prepared to fire employees who aren’t helping your company grow, and make sure that all of your decisions are supported by statistics. Similarly, you can manage your home funds by reducing unnecessary spending and preparing 6 months long funds.
Focus on Keeping the Cashflow
Fewer people paying their bills means that businesses will reduce spending, leading to less demand for goods and services. Even though it might not be the ideal long-term strategic choice given that you want to keep your key players, businesses frequently cut workers during recessions.
Lookout for Warnings
It would be excellent if you closely monitored all of your important KPIs. Ask yourself why if you see a slowdown in sales. Is there a problem with your goods or services? Do people purchase less now? Should you reduce your prices? Or you could provide better customer service. Watch the state of the economy in all sectors. This will enable you to anticipate potential future developments for your company.
Hire Extra Hand
Though it may sound contradictory to the situation, an extra pair of hands can help you ease the workload. It may be a good idea to prepare your company for the future now that talented candidates who haven’t been available for a while will be available on the market. What will your company look like once the recession is over? What skills does your team need to have to advance? The time may be right for bold action, but be sure you thoroughly assess the danger.
How Long Will the 2023 Recession Last?
According to Former Bank of Canada and Bank of England governor Mark Carney, Canada is expected to heal faster than other countries. Though many people have lost jobs due to the recession, but the market condition is soon expected to rise because of the strong labor market and comparatively lower unemployment rate.
He added, “with Canada’s trade agreement with other G7 nations will also help in recovery from recession. So, certainly, Canada will recover at a much faster rate than other nations. So brave yourself for the problems and challenges. And take the next 6 months as a base for your financing period. In the end, if you ever need some extra help, get a fast e-transfer loan from us for flexible tenure.