The economic crisis is a considerable decrease in the economy, instability in the markets, and consequences in the economic sectors will vary, causing the decrease in commercial activities ascending to the production and consumption level, with a great i
  9/20/2022 12:02:25 PM  By: Monica Ramirez

Economic crises are usually identified through changes in economic variables since the production of goods and services of companies and their consumption is reduced by the economic situation. The main economic indicators are Employment levels and gross domestic product (GDP). The biggest consequences of an economic crisis are high unemployment and inflation, a decrease in the creation of companies, product shortages, and a lack of investment and savings, all of these prevents a country from progressing and affects its population.

In other words, an economic crisis "is configured when there is a drop in economic activity, that is, in the provision of goods and services", which is reflected in a negative variation of the Gross Domestic Product (GDP). High inflation in the US caused the Central Bank (Fed) to raise interest rates, but in doing so it triggered global fears of economic recession which, depending on its strength, could lead to a crisis.

As prices rise, money is worth less, therefore purchasing power decreases. Inflation is one of the main concerns for the world economy, with more importance after the COVID-19 pandemic. Having price increases that reach historical maximums in Europe and the United States.

In the last 40 years, inflation has increased progressively, in the United States in December 2021 it reached 7% year-on-year, a record since 1982. There are clear indications of what has driven inflation and it is the presence of “supply inflation”, a consequence of increases in energy prices and global supplies, related to closures of activities during periods of confinement in many countries. , and subsequently the recovery of the economy. One of the main mechanisms to control inflation is to increase the interest rate, but with this, the companies are greatly affected, the credits become more expensive and therefore their expansion is slowed down.

In order to curb inflation, it is of great importance to increase the rate of production of inputs and goods, increase public and private investment with the aim of generating growth in the number of new companies, and increase the capacity of those that already exist. It is essential to avoid the bankruptcy of more companies by increasing the appropriate conditions for their operation, through fiscal support, strategic alliances, legal certainty, security, and, above all, a stable economic environment. Inflation can be controlled by boosting market supply.

Finally, the pandemic and the war in Ukraine and Russia have caused a clear increase in world inflation. And for companies there are three key points to maintain their competitiveness during this economic crisis:

1.Prioritize the resolution of problems with customers, partners, and professionals within the company to strengthen it.

2.Use technology to gain efficiency and agility as quickly as possible to build resilience.

3.Pay attention to specific aspects of your industry.