The headlines today read, “World bank gives dim outlook on world economy amid Russian/Ukraine conflict. Why would a conflict on the other side of the world affect the world economy? It is not evident when looking from the outside in. The dynamic between the Ukraine and Russia has to do with resources. Gasoline prices have skyrocketed because of the war. This war in particular affects world gas and oil supplies.
Interestingly enough, the reason cited for the sharp decline in the world economy is a shortage of food. This is only a small portion of the problem. Stagflation is another reason quoted. It is an economic slowdown that has been building over the past four years.
The World Bank’s president, David Malpass, is quoted as saying, “For many countries, recession will be hard to avoid”. World economic growth prediction were typically 5.7% but have fallen to a mere 2.3% predicted growth. The slowdown is a reality. Over the next 2 years, world economic growth is only predicted to be at most 3%. This is not a good outlook for the global economy.
COVID is another consideration when looking at the second largest economy in the world, China. China has the whole country on lockdown with a zero COVID tolerance. China’s economy is predicted to slow from 8.1% to 4.2% over the next year and continue in a decline predicted for the entire world. Third world countries will suffer the most. Smaller countries with high unemployment will suffer the worst as they do not have the resources to weather such an economic storm.
This same ideology applies to small business in the United States. When the economy is doing badly, small business suffers more than other larger corporations because they do not have the capital to withstand such an economic storm. The best thing a small business can do is have enough funds on hand to weather the economic downturn. In the United States, 85% of small businesses experienced financial challenges in the last year.
The problem with the economic outlook is that no one is talking about the real reasons behind the conflict. After The World Bank’s series of excuses, the real reason comes bubbling to the forefront. Caspian Sea oil and gas reserves have been on the table since the beginning of the Afghan war. The United States entered Afghanistan in order to secure territory close to the Caspian Sea oil and gas supplies. As early as George Bush Jr., the United States set its sights on the reserve supplies. Unfortunately for the United States, Russia and China came to the forefront to secure many of the oil and gas reserves. The war in the Ukraine is just another attempt to secure energy supplies in a depleting energy world.
As gas and oil prices skyrocket, as inflation turns into stagflation, as prices rise and incomes stay the same, many people are going to suffer. Small business owners are always the first to suffer in a bad economy. Mary Allan, economic professor, states, “The global economic outlook affect every single country. When peering in closer to the United States, we see that business in general suffers. People have less money to buy products and services. If a small business is not prepared, they will fold like many small businesses did during the height of COVID”.
Every small business needs to prepare now to weather the economic storm coming in the next couple of years. A bad economy can have the same effects as COVID has on small business. Plan ahead for the recession. Have enough funds on hand to make it through the economic downturn. Plan on selling less or your product or service. Cut as many corners as possible to maximize the amount of money available to keep your business running smoothly even in the worst of circumstances.