What is stagnation and how does it affect your pocket

behavior Economie around the world concerned. Cryptocurrencies represent significant crashes, the dollar is rising, the euro is falling, and the volatility of markets and exchanges is generating distrust of investors. Interest rates are rising in Colombia and the annual inflation data does not subside. There is talk of a possible global economic recession and how it will affect the pockets of Colombians.

According to Johan Caldas, attorney, economist and professor at the University of La Sabana, A recession occurs when a country’s economy stops growing for two consecutive quarters and begins to contract. As a result of economic downturn, there is a fall in consumption, loss of employment, a fall in productivity and an imbalance in the trade balance.

You can read: Unstoppable Rise? The dollar broke an all-time high and settled at $4,300

According to the expert, The fear of recession comes from the behavior of the US economy, which is facing a significant decline in its economic activity. “In this sense, in the first quarter of the year (January-March), GDP contracted by 1.6%, and a similar result is expected for the second quarter (April-June). These two consecutive periods of contraction will constitute a recession. Even if the second quarter does not show a contraction, the short-term dynamics of its economy perceive a high probability of entering a recession.”

The above worries the global economy, considering that The United States is the largest economy in the world, and a recession in that country would generate fear and uncertainty in all markets. Added to the situation in the North American country is the narrow economic situation in Europe, which was mediated by a conflict between Russia and Ukraine that led to an increase in prices for various inputs that are crucial for the economy, which exacerbated the problem.

How will the recession affect Colombia?

Taking into account that The United States is Colombia’s largest trading ally, and Caldas asserts that a recession in its economy would have direct and indirect effects on Colombia’s economic growth, “In the IPC, in the exchange rate, among other things.”

The consequences of this economic phenomenon will be: Unemployment, an increase in the prices of goods and services, an increase in the exchange rate and a general increase in interest rates for investment and consumption.

“On a daily basis, people can feel the effects of the recession in job losses or increased difficulty in accessing jobs; in higher prices for basic household basket products, such as food and cleaning; in higher exchange rate which leads to higher prices for imported products like clothing and technology; and in the expert says Economic “increase in the prices of trips abroad.”

As a recommendation, the expert advises, in this time of uncertainty, It is necessary to be moderate in consumption, to avoid making unnecessary investments, to avoid expenditures of opulence or luxury and to try to increase savings.

See also: Annual inflation up through June 2022, according to DANE

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