“There is always some chance of a recession in any year. But the evidence suggests that expansions don’t die of old age. “-Janet Yellen
A LOT has been said about the turbulence in the global economy and in our country. The pandemic, the war in Ukraine, the unstable price of oil, etc. they are seen as contributing factors to the unfavorable economic situation. Recently, there is even a debate as to whether the recession is already among us.
In the United States, the National Bureau of Economic Research (NBER) is considered the official arbiter of the beginning and end of a recession. He defines the recession as “involving a significant decline in economic activity that is widespread throughout the economy and lasts for more than a few months.” The NBER is based on three criteria: depth, duration and spread or how deep it is, for how long and how widespread is the economic weakness.
As a non-economist, I see the current situation as part of an economic cycle characterized by ups and downs. Recession, contraction or downturn is inevitable as there can be no continued growth. When, how and to what extent the recession or any downturn may be “unknowable”. History will only tell where looking back, it could be a 20:20 vision. Comparisons with similar past events are natural consequences.
Interestingly, in the unusual behavior of the economy, regulators have an important role to play. Among the important elements to consider are the rate of inflation, employment, business growth and / or the contraction and reaction of the financial markets. Regulators have their own tools to “manage” the situation, so the recession could call for a “soft landing”.
The debate over whether or not we are in a recession will surely persist and inevitably a recession will materialize. Expansions last much longer than recessions and / or contractions. Investors were generally rewarded for their time in the market versus the timing of the market.
From the experience of past economic weaknesses, one should learn that prudence, patience and discipline are indispensable for riding the waves of economic downturns.
After all, nothing is forever!
Conchita L. Manabat is the President of the Finance Development Center. She is former President of FINEX and past Chair of the International Association of Financial Executives Institutes, she holds the role of President of the IAFEI Advisory Council. She is a member of the advisory groups of the International Auditing & Assurance Standards Board and the International Ethics Standards Board for Accountants. The opinion expressed in does not necessarily reflect the views of these institutions e Business mirror. Find out more about #FINEXPhils through www.finex.org.ph.