US entering recession, an inverted yield curve and rising interest rates on the back of high inflation (8.5% in March), with COVID uncertainty and disruptions caused by Russia’s invasion of Ukraine thrown in, that’s what economists told us.
Let’s put aside what it will impact the US economy, and focus on the rest of the world first. Most if not all the countries are undergoing COVID-19 recovery and opening up their borders that aim to encourage world tourism visit and bring in oversea revenue.
How the US government and Fed intervention have a huge impact for either shortening or prolonging the recession. Of course, everyone will attempt to prevent for once in the history Great Depression happen the second time, as it last for 10 years.
In the 2 years of COVID-19 pandemic, a massive number of jobs were eliminated or automated by AI robotics. And more will be eliminated as the world transitions toward the fourth industrial revolution (4IR) Industry 4.0. Unless the predicted Coronavirus wave this fall could infect 100 million within the US alone never happen, else then significant waves of deaths this fall and winter will happen. We can imagine what will happen to the rest of the world. We will expect to see more countries like what happened in Sri Lanka now.
Put aside those already falling business in the last 2 years. The balance of business, how many can be sustained if one more round of massive COVID-19 pandemic variant comes where the current vaccination and booster can not be protected?
A lot of countries are now suffering through the highest inflation. In fact 60% of the advanced economics in the world now have inflation. Over half the developing world, in inflation, is seeing the worst inflation in decades. The rise and return of Global Inflation, make food prices globally at their highest levels now. Consumers in general will decrease their need to spend, substitute or postpone the needs. Businesses will encounter an oversupply market, too many suppliers and too few buyers, as consumers are under pressure of uncertain futures and not sure how long the recession will go on. We will expect a rise in unemployment rate, as a decline in the market demand, then businesses need to decrease their production capability, which includes hiring less employees. This spiral cycle will go on, until the demand and supply meet one another in the future.
Some are proposing hyperinflation that is coming after COVID-19 crisis. All the countries in the past 2 years spent a lot of money on government stimulus packages. It is future debt, and got the interest to be paid. If the country raises the debt and reaches the level they can not pay off? Look at what happened in Sri Lanka.
We may expect more strategic resources from offshoring and back to the US to boost the US domestic economy. You see massive multinational corporations relocate their world factories and disinvest from China in recent years. Some of them relocate to another country, some move back to the US. For country that can not persuade for foreign investor to set up plant and increase local employment, compare with those who can, we expect to change the dynamic in competition for merely few years time. Read the news and see Indonesia’ Jokowi meets Tesla for a deal for a battery venture and sets up a plant in Indonesia. That is what a great country leader should do. Of course, whether Tesla chooses to invest in Indonesia or in India, we need to follow the news.
E-SPIN Group in the enterprise ICT solution supply, consultancy, project management, training and maintenance for corporation and government agencies did business across the region and via the channel. Feel free to contact E-SPIN for your project requirement and inquiry.
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