Is there going to be a recession in 2023!? After going through some data, what I can say (and I know very little, so take what I say with a grain of salt) is that the growth is going to slow down for sure, and inflation will probably increase. But recession? On one hand I see that emerging countries are going to face quite the backlash, but on the other hand I’ve read reports that say India should be okay?

[See the data I have collected below for reference]

There’s a very high possibility as economies are literally hanging by the balance. Let’s hope that we do not go into recession the next year and we can weather the storm even if that happens.

There are lot of people (or ‘bros’) who claim that ‘The Market is On Sale’, ‘We can make HUGE profits!’, ‘Recession is a good thing for people looking to invest!’.

While they are not WRONG, and yes the stock market will dip and you can essentially buy shares and mutual funds at a lower rate – That is honestly not the best view of a recession, tens of thousands of people are going to lose their jobs, basic amenities are going to become unaffordable, people’s hard-earned savings are going to be wiped out, people will inch closer to poverty – just to name a few terrible things that might happen.

What can you do for others during this time?

1. If you have paid help at home, think about increasing their wages next year. Things are going to get expensive for them as well.
2. Try not to bargain with local/street vendors or autorickshaws (unless they’re charging something you KNOW is outrageous).
3. Tip a little more generously to Swiggy/dunzo delivery executives, waiters, busboys.
4. If you know folks who are unbanked, volunteer to help them open a zero balance account through the Jan Dhan Yojana.
5. Most of all, try to maintain some perspective during the coming months. It’s going to be all right. Fear-mongering is NOT the answer.

What can you do for yourself during this time?

1. Do not touch your investments. If in need of funds, then I totally understand. But TRY to not sell your stuff when the market is low. You WILL lose money.
2. This is a general advice, so again think about whether it actually fits your situation. Since there are so many lay-offs going on, I would suggest you stick to the current role for some time.
3. Put off big expenses IF possible. For example – you cannot or should not really put off a surgery that’s been planned. Full disclosure – I’m getting married in Feb and this is a BIG expense. I don’t see how I can possibly put this off since all the preparations have begun already. I guess I’ll have to clamp down on other expenses and see how to go from there. But if you can live without a new laptop/ new phone/ a vacation (like a big one), then it might bode you well to save that expense.
4. Do not STOP any investments unless there’s an actual need for that money. Like the investment ‘gurus’ put it – this is actually the time to invest in the market. So if you already have systematic investment plans running, do not stop them. Let them continue.
5. Pad the Emergency Fund with more cash. Whatever you think you need if you get laid off, you might just need more given the rate of inflation and the possibility of a global recession. I recently had to use up my emergency fund, and have restarted the painstaking job of building it back up again, honestly, I’m not sure if I can reinstate it back to its previous glory. But I’m going to try.
6. Ensure that you are using all the benefits that your employer is providing you.
7. Get a term insurance plan. I cannot stress on this enough.
8. Just because the CRYPTO market has imploded does NOT mean it’s the time for you to heavily invest your life savings in it. It’s extremely volatile and HIGHLY unregulated. Only only only invest if you’re completely okay with the possibility of losing ALL the money.

Now the data, as promised:

Excerpts from ‘Is a Global Recession imminent?’ – by World Bank Group

As growth is slowing sharply, fears of an impending global recession are rising (Figure 1A). Stagflationary pressures are also mounting as inflation reaches new multi-decade highs in many countries (Figures 1B and 1C).

Moreover, rising global borrowing costs are heightening the risk of financial stress among the many emerging market and developing economies (EMDEs) that over the past decade have accumulated debt at the fastest pace in more than half a century (Figure 1D).

These downgrades in growth forecasts do not imply that a global recession will take place in 2022 and 2023.

However, these forecasts imply that the world economy is set to experience weaker growth next year than it is this year.

But if previous global recessions are a guide, there are still at least two reasons to be concerned about the risk of a global recession in the near term. First, given the current weak growth outlook, even a moderate negative shock could push the global economy into recession. Second, the recent slowdown in global GDP growth reflects pronounced declines in growth in several major economies.

Conclusion: Recent consensus forecasts suggest that the global economy will experience its steepest decline in growth over the next two years following an initial rebound from global recession since 1970.

A global recession would also translate into a sharp decline in growth in EMDEs. In light of elevated vulnerabilities in many of these economies, they would face severe challenges associated with financial stress.

Our analysis indicates that the global economy could escape a recession even if additional monetary policy tightening beyond current market expectations is needed to reduce inflation. However, this would require the additional tightening to be implemented in such a way as to generate an orderly adjustment in financial markets. More importantly, policymakers need to utilize the full menu of options available to get ahead of inflation and reduce the likelihood of a sharper decline in growth.

If the ongoing global slowdown turns into a recession, the global economy could end up experiencing even larger permanent output losses relative to its pre-pandemic trend

Other Publications

https://www.indiatoday.in/diu/story/global-recession-2023-how-it-affects-india-detail-2284356-2022-10-12

https://www.hindustantimes.com/world-news/worst-to-come-2023-will-feel-like-recession-imf-warns-in-world-economic-outlook-cuts-india-growth-forecast-101665500681971.html – “’Worst to come… 2023 will feel like recession’: IMF warns, cuts India forecast”

https://www.thehindu.com/business/recession-unlikely-in-apac-region-in-2023-moodys/article66179117.ece –
“India has emerged as “a bright light” at a time when the world is facing imminent prospects of a recession, IMF chief economist Pierre-Olivier Gourinchas had said.”
”A recession is unlikely in the APAC region in the coming year, although the area will face headwinds from higher interest rates and slower global trade growth, Moody’s Analytics said on Thursday.”