Prepare for an economic recession, this is what the community should do

KOMPAS.com – Finance Minister Sri Mulyani Indrawati has revised the projection for economic growth in the third quarter of 2020.

According to him, in the third quarter, the Indonesian economy is likely to experience a contraction from minus 2.9 percent to minus 1.1 percent.

As for the overall economic growth at the end of the year, according to him, it will also be in the range of minus 1.7 percent to minus 0.6 percent.

With this, according to him, economic growth in the third and fourth quarters will also be negative.

The existence of this does not rule out the possibility of an economic recession in Indonesia.

Launch from Forbes, a recession is a condition in which there is a significant drop in economic activity that lasts for months or even years.

Also Read: Sri Mulyani’s Third Quarter Economic Projection of Minus 2.9 Percent, Prepare for a Recession

So if the recession does happen, what will be the impact on the community and what should be prepared for?

Impact

The researcher at the Indef Digital Economy and Innovation Center, Nailul Huda, said that one of the possible impacts of a recession is an increase in the number of unemployed.

He said the large number of unemployed arose due to declining production coupled with declining aggregate demand from the community, which then had an impact on the number of businesses that closed or went bankrupt.

“The impact of the recession is interrelated and there is a snowball effect (rolling and getting bigger),” Huda said when contacted. Kompas.com Tuesday (22/9/2020).

Meanwhile, if the recession continues, according to him, the additional impacts that will emerge then are:

1. The higher the bad credit is due to the decrease in people’s income, and
2. Poverty will increase.

Also read: Impact of the economic recession

He said a recession has the potential to reduce investor interest due to weakening purchasing power.

In this way, they are reluctant to invest and market their products nationally.

“So the effect is like a snowball, the bigger the problem that will arise from the recession,” he said.

What to prepare for the recession

According to Huda, a recession likely to occur in the third quarter of 2020, several things for the community to prepare are as follows:

1. Change the consumption pattern from tertiary consumption to primary consumption
2. Increase savings to face the economic crisis (for those who still have income)
3. Opening a new business, for example, through online services for people who have already been laid off.

Furthermore, Huda reminded the government to prepare in relation to this recession.

“Prepare a social safety net for the affected community,” he said.

Quoted from Kompas.com (8/4/2020), financial expert Ahmad Gozali said that people can do several things to survive the economic recession.

Also read: If a recession is inevitable, this is what society can do

How to survive a recession

To survive during a recession, Gozali said there are several things that can be done in general, namely:

Protect your source of income

As an employee, according to him, it is best not to change jobs aggressively before being certain that the new job is more stable.

“For those who have a business, reconsider the expansion plan,” Gozali said.

Have a reserve fund

He presented that the proposed fund should take care of 3 to 12 monthly withdrawals in liquid form.

“This means that if it is less than that, it can be added by reducing high-risk assets and increasing liquidity,” Gozali said.

Maintain big expenses, especially credit

If you previously had a car loan or mortgage plan, you need to re-examine the risks.

“Is it safe enough to continue with the plan? Don’t be too aggressive, for example, using reserve funds to pay down payments,” Gozali said.

“The thing is, reserve funds are becoming more and more important, don’t use them for other things yet. Even if they can be added,” he added.

Keep shopping regularly

“Because household consumer spending for important things in Indonesia is actually one of the dominant economic engines,” Gozali said.

Also read: Which countries are most affected by the recession? Here is the list