what is an economic recession

What is an Economic Recession: Impacts and Strategies to Deal With It

What is an Economic Recession – Lately, there have been many discussions and discourses on social media and the news about the economic recession. The term recession has often been discussed during the COVID-19 pandemic that hit various countries worldwide. FYI, Indonesia is also rumored to be experiencing an economic recession in 2023. FYI.

Taken from detik.com, several countries will probably be impacted by an economic recession, namely Mongolia, South Korea, China, Japan, Indonesia, and European countries. A recession will also hit even the United States.

Actually, what is the meaning of the economic recession? Then, what causes a recession? Check out the following article to find out what a recession is, its effects, and how to deal with an economic recession.

Also Read: What is a Financial Problem? Read More!


What Is an Economic Recession?

According to According to The Big Indonesian Dictionary, a recession is a sluggishness or decrease in trade, industrial and so on (as if it has stopped) in a country.

Meanwhile, quoting from OJK.go.id, an economic recession is defined as a condition when a country's economy is deteriorating, as seen from a negative Gross Domestic Product (GDP), increased unemployment, and negative real economic growth for two consecutive quarters.

So, to conclude, an economic recession is when a country's economy is deteriorating and triggers a decline in company profits, increased unemployment, and financial bankruptcy.

Even now, maybe some of us have experienced a decrease in income since COVID-19 hit. With restrictions on community social activities (social distancing) , many of us end up experiencing the effects of termination of employment (or PHK in Indonesian). So, what are the impacts of the economic recession that will occur besides those already mentioned?

Impact of Economic Recession

The recession will undoubtedly affect all groups of people, from the government and companies to workers. The following is an explanation of the impact of the economic downturn that you can see here.

The government is the highest authority in the country, which is responsible for the prosperity of the people and the country. Therefore, if a recession occurs, the government is responsible for protecting the people. However, of course, all actions taken by the government have several risks that come with the actions taken.

1. The Impact of the Recession on Workers

The real impact that can emerge from the economic recession is the termination of employment (PHK). Due to layoffs and salary cuts, workers may lose their primary income or some of their income. If they experience layoffs or reduced income, meeting their daily needs will also be challenging. This impact certainly not only affects their personal life but also affects the economic stability of a country.

2. The Impact of Recession on Companies

The impact of a recession on companies that may occur is bankruptcy. This is of course triggered by various factors, such as a negative economy, reduced real resources, falling asset prices, increasing debt, and others. The company will experience a drastic decrease in revenue, so that the business may face bankruptcy.

When there is a decrease in worker income, of course, it will have a domino effect on the company's economic life. Workers affected by layoffs will undoubtedly lose or reduce their income and decrease people's purchasing power.

When people's purchasing power declines, the company's income will also experience a drastic decline. This condition threatens the company's sustainability because the cash flow is troubled.

The public will also, of course, be more careful in using their money during the recession. So that the demand for the company's goods and services automatically decreases. The company will adopt a market war strategy, in which the company will make massive price cuts to attract buyers. This will significantly impact the company because of the loss of profitability.

3. The Impact of the Economic Recession on the Government

For example, one of the impacts of the recession that many of us feel is the termination of employment (PHK). As a result, economic activity became sluggish, affecting the VAT (Value Added Tax) revenue which also decreased. The government is still required to develop for the people's welfare.

The government needs funds to provide community subsidies, benefits, social assistance, etc. While tax revenues decreased, welfare payments rose. This resulted in the state experiencing a budget deficit and accumulating state debt.

Strategies in Facing an Economic Recession

1. Make a Financial Plan

Do you still remember the 50/30/20 financial planning formula? Yes, you have to allocate funds to three main posts. Allocate 50% of your monthly income for routine expenses like house payments, car payments, insurance, etc.

Then 30% is allocated for daily needs, such as food and other monthly shopping. At the same time, the additional 20% is allocated for emergency funds or personal savings. So that whenever you need an emergency fund, you have everything prepared.

This financial planning formula may look easy, but in practice, many people still need to be consistent and manage their finances properly. Some ways can help you manage your finances well, namely using financial applications, one of which is Whiz. Whiz is a money management app made especially for families in managing their finances better.

2. Avoid Unnecessary Expenses

Sometimes there are lots of expenses that we don't need. Right now, you have to start avoiding unnecessary costs, OK. Begin to distinguish which one is a need and which one is just a mere wish. It would help if you made a priority scale of needs to facilitate better financial allocation and money management.

3. Live a Frugal Lifestyle

Live a frugal life and don't need to worry too much. Make consumption a priority and start reducing things that are not required. Public consumption is indeed very influential on a country's economy, but remember to keep doing financial planning and setting aside money. Reduce purchases of items that are just for fun. Use a health insurance facility if you want to seek medical treatment, bring your meals when leaving the house, and start reducing coffee purchases by making your coffee from home.

4. Look for a Side Job

Looking for a side job is one of the powerful strategies to overcome an economic recession. Keep continuing to use the opportunities that you can maximize, okay? By looking for a side job, your income will increase so that you can fulfill your needs properly.

Also Read: How to Make a Personal Financial Plan, Beginners Must Know!


An economic recession is indeed something that is concerning for many countries, including Indonesia. But you don't need to worry too much, okay? Because there are still many strategies, you can do to overcome this condition. Stay positive!

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