Did you know that the ‘Great Recession’ of the late 2000s is not even the worst recession in history? According to researchers, we could look at another ‘Great Recession’ as early as 2022. The country seems to be returning to normal after a few years of economic uncertainty, and many experts believe that things will continue to get better over time. The question remains, however: How much better? Some economists are even predicting that the U.S. could enter its next recession as soon as 2022 — and if you listen to them, they may have a point. After all, some warning signs are pointing towards another downturn in the future.
So, read this blog further to know more about the upcoming U.S. Recession 2022 and its possible consequences on India.
Is A Recession Coming In 2022?
Since the Great Recession of 2008, the world has been slowly recovering from a financial crisis that took down some of the major economies in the world. Economists are now predicting that the U.S. will have a new downturn in 2022. And a downturn in one country can easily spill over into other countries or industries if they rely heavily on exports or imports. For example, if a large number of companies were operating under high levels of debt at the same time, then their failure could hurt their suppliers and customers more than they would like to admit.
What Happens If There Is A Recession In The U.S.?
The United States is the driving force behind the global economy. When there is recession in the U.S., the economy starts performing poorly, which can significantly impact the rest of the world. The most important reason is that trade between other countries and the U.S. accounts for almost two-thirds of global Gross Domestic Product (GDP) or total economic output.
Moreover, a slowdown in the United States will have consequences across the global economy. A decline in demand for goods, services and capital will lead to lower profits for companies that rely on export markets for sales or earnings. That said, many countries outside the U.S. are also vulnerable to external shocks that can adversely impact their economies.
How long will the U.S. recession last in 2022?
There’s no such thing as a recession that lasts forever. The economic recession cycle will eventually end in 6 months to 2 years, and the nation will emerge from the downturn. However, U.S inflation, businesses tend to cut back on spending when an economy is going through a downturn and scale back their workforce to reduce expenses. Therefore, a recession can cause significant financial strain for individuals, small businesses, and even large corporations.
How Do You Survive A Recession?
A recession in one country can easily lead to reduced demand for exports and imports from other countries and result in an adverse chain reaction across the globe. Fortunately, there are ways to cushion the blow if you are prepared with other strategies to help you ride any economic downturns.
So, follow this guide on how to prepare yourself financially during an economic recession and return stronger than ever once it’s over.
First, let’s have a look at how to prepare ourselves for recession:
- Save funds for emergencies: Plan your budget and set aside a specific amount of money for emergencies every month. If you save money for at least six months from now, you will have better chances of surviving the recession.
- Pay off your debts: Focus on paying off your debts at the beginning of your month. Pay off the debts with high-interest rates to reduce your burden. Because clearing your debts will reduce your monthly expenses and help you during a recession.
- Create additional income sources: There are high chances of losing a job during a recession. So it is better to create additional sources of income to increase your financial security. It can be a second job, online business or passive income.
Now, let’s have a look at how you can survive a recession:
- Talk it out: Sit with your family and discuss your current financial situation. This discussion will help your family understand your financial health and resolve money management issues.
- Reduce expenses: Check where you are spending more and reduce unnecessary expenses. You can reduce your expenses by buying things only if required, carpooling instead of taking your car, and eating home-cooked food instead of spending on restaurants.
- Prove yourself: Many companies lay off their employees during a recession. So to prevent yourself from being laid off, prove yourself an excellent employee. Improve your skills and keep yourself updated to stand out from your competitors. Show that you have the potential to raise profits for your company even during recession.
- Keep saving: Don’t stop saving. Take a portion of your salary and keep it in your savings account as soon as you get paid.
- Invest smartly: Invest a small amount in the stock market. Because if you buy stocks from reputed companies when they have lower prices, you will have a high chance of gaining more profits when the company returns after a recession.
Effect Of U.S. Recession In India
Now, Let’s look at the effect of the U.S. recession on India.
Experts say that the upcoming U.S. recession will reduce India’s growth trajectory. As per the forecast of Nomura, the Indian economy will see a slowdown in growth during a “prolonged mild recession” in the U.S.
According to the U.S. economics team, this mild recession in the 4th quarter of 2022 will cause tight financial situations, adverse consumer shocks, and disruptions in energy and food supply, ultimately weakening global growth prospects.
The exports in India will be negatively affected as it is highly dependent on E.U. and U.S. markets. Hence, there will be adverse effects on exports for a short period.
Impact Of U.S. Recession On Indian Rupees
The slowdown in the U.S. economy will affect the exports in India. Due to this recession, the Indian National Rupees (INR) value will hit a record low against the dollar. As the Rupee value has already fallen over 6.5% this year, traders and strategists expect that the Rupee will touch levels of ₹80 against 1 U.S. dollar during the U.S. recession.
The U.S. recession in 2022 is expected to have a negative effect on India’s economy. The main reason for this is that the United States is India’s largest trading partner, and a recession in the U.S. would lead to a decrease in demand for Indian exports. Additionally, the U.S. is a significant source of foreign investment in India, and a recession in the U.S. would lead to a decrease in foreign investment in India. As a result, the U.S. recession is expected to cause a slowdown in India’s economic growth.