The formula with which a country can face and get out of a recession

In its simplest definition, a recession is the decrease in the commercial and industrial activity of a country, whose consequence derives in a decrease in wages, income and employment that can occur in several ways, including high inflation.

(ABC to understand what a recession is and how it would affect your pocket).

According to multiple forecasts, several of the world’s economies are currently under this economic phenomenon, which can lead to an unprecedented global crisis.

However, experience and practice say so, in the past the world has already overcome adverse situations like these and has come out of recessions.

How to do it? For Gloria Nancy RiosCoordinator of the Finance Program of the Polytechnic Grancolombiano, economist, specialist in management and master in social psychology, the formula is the same as the one that a person comes out of a debt.

“We have to calm down, be meticulous, plan, be well informed, without allowing ourselves to be absorbed by fear, but at the same time act. I am making the parallel between an economy and an ordinary person. When I refer to action, I mean that we need a lot of internal government policies to avoid inflation and unemployment at the same time. For this, the Government could use international reserves and carry out capital controls. In addition, the Banco de la República can use interest rates as a mechanism to control inflation and later to expand the economy”, points out the expert.

(How the devaluation of the peso impacts the Colombian economy).

Precisely, one of the recipes that are part of the formula to avoid recession has to do with making the economy more expansive and for this, governments cannot neglect any sector of the economy, since they all add up.

During a speech in 2020, in the midst of a pandemic, the director of the International Monetary Fund (IMF), Kristalina Georgieva, titled ‘A long road uphill: How to overcome the crisis and build a more resilient economy’, He explained the keys that a country must take into account to face and overcome a recession.

One of those keys was the application of a flexible and forward-looking fiscal policy.

(Saving and not borrowing, measures against rising inflation).

“This crisis has caused profound structural transformations, and governments must play their part in reallocating capital and labor in support of the transition. For this, stimuli will be required for job creation, especially in green investment, and it will be necessary to cushion the effects on workers, through retraining and recycling, but also by expanding the coverage and duration of unemployment insurance. For the transition to new jobs to be fair, it will be essential to protect social spending”he stated.

According to the executive, fundamental policies and reforms are required to build a more resilient economy: greener, smarter and more inclusive; in short, more dynamic.

It is also key that jobs are not lost to avoid social impacts.

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