Based on the International Monetary Fund (IMF) Update, global economic growth is projected at 3.1% in 2024 and 3.2 % in 2025. This forecast is lower than the historical average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth.
Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8% in 2024 and to 4.4% in 2025.
These changes are driven by a variety of factors, including geopolitical tensions, technological advancements, and environmental considerations.
As we delve into these global economic changes, it’s important to understand how we can prepare for the unpredictable. Let’s start by looking at the steps individuals can take.
Preparing for the Unpredictable
For Individuals
Budgeting & Debt Management: It’s impossible to eliminate all risk from our lives, financial or otherwise. We can’t control whether markets go up or down. A number of life events can risk changes to income or savings and threaten an individual’s or family’s financial well-being. Therefore, budgeting is one of the easiest things you can do to improve your financial stability.
Emergency Fund: An emergency fund is a key component of any cash management strategy. Review several months’ worth of recent expenses to determine ways you can have liquidity readily available should you need to fund an emergency need.
Healthcare Expenses: Almost half of Americans — 47% — say they find paying for healthcare difficult. Check if your employer offers a tax-advantaged account such as a flexible spending account (FSA) or health savings account (HSA), which allows you to pay for healthcare expenses with pre-tax funds.
While individuals can take these steps, businesses also need to prepare for unpredictable economic changes. Let’s explore some strategies businesses can adopt.
Preparing for the Unpredictable: For Businesses
Holistic Approach: It starts with good corporate governance and responsible financial policies. Maintaining a holistic approach to financial management is crucial.
Internal KPIs of Financial Health: Define internal guidelines and KPIs (key performance indicators) for your firm’s financial health.
Ample Working Capital: Having ample working capital at all times allows your business to remain agile, maintain continuity and immediately start working toward a solution.
Keep Your Finances In Order: Creating a solid financial foundation, based on careful budgeting and tracking expenses, can go a long way in helping to prepare your business for unexpected financial hits.
In conclusion, preparing for the unpredictable in the global economy involves understanding the current economic climate, planning for personal financial risks, and implementing sound financial strategies in businesses.
By staying informed and prepared, we can navigate these uncertain times with confidence. Remember, the best way to predict the future is to create it.
Stay informed, stay prepared, and stay resilient. The future is unpredictable, but with the right preparation, we can face it with confidence.