Toward the end of 2022, reports and pronouncements that next year will see widespread recession created an atmosphere of profound anxiety. We are bombarded daily with news reports heralding the recession that is about to hit us soon. Barely have we heaved a sigh of relief at the presumption that the worst of the Covid-19 pandemic that has been ravaging us since the beginning of 2020 is over, the threat of a recession is right there at our doorstep.
The word “recession” conjures visions of dismal economic conditions marked by skyrocketing unemployment and steadily rising prices for basic necessities that seem unstoppable. Executives in charge of businesses are distressed by the prospect of declining sales. The most terrifying prospect is that cost cutting cannot keep pace with the sharp decline in revenues leading to losses – or worse. If the losses pile up over an extended period, the company faces the worst possible outcome that it has to file for bankruptcy and ultimately cease to exist.
If we pause and reflect amidst the never-ending doom and gloom about the recession, it will dawn upon us that actually there is no consensus about the nature and extent of the recession. Everybody is talking about a recession but there is no common understanding what this term actually means. There are those who speak in general terms, then there are those who explicitly point to 2023 as a “dark” year because of recession.
Most of the debates on the probability of a recession centers on the economy’s sluggish recovery from the pandemic’s aftermath, exacerbated by the conflict between Russia and Ukraine. Food and fossil fuels became scarce as a result of the war in Central Europe. In particular, gas and oil are mentioned as the culprits for triggering a global recession in 2023.
On the other hand, in Indonesia many expressed the optimistic view that the country’s economy will grow driven by rising domestic consumption despite the threat of a global recession. This view is among others espoused by the Chairman of APINDO (Indonesian Entrepreneurs Association), Haryadi B. Sukamdani. Most of the experts who contributed to the year-end supplement to the daily Bisnis Indonesia entitled “Directions for Business & Politics 2023: Solid & Recover” tend to share the bullish sentiment regarding Indonesia’s prospects for 2023.
It is not unusual to have divergent views in social sciences. Unlike mathematics, economics cannot predict with certainty. That said, it would be very helpful if the financial authorities could provide a thorough explanation of the prospects of a recession, and the mitigation measures taken by the government, using language and terms that are easily understood by the public at large.
The simplest definition of a recession is negative economic growth for two consecutive quarters, something that is actually not extraordinary because the economy will not always grow continuously. What we have experienced, and the government has been able to handle well, is the impact of the COVID-19 pandemic on the economy, which has been in decline for much longer than two quarters.
In addition to coping with the public health impact the government has successfully dealt with the economic downturn caused by the COVID-19 pandemic. These accomplishments have given confidence in the government’s ability to manage the country’s economy while taking into account the possibility of a worsening situation that could not be anticipated beforehand. To cite the Minister of Finance Sri Mulyani, we must be optimistic, but remain vigilant.
What we would like to see more is efforts of companies to provide peace of mind to employees in regard to the possibility of a recession. In the face of uncertainty, sound management principles dictate that we proceed with caution while preparing for the worst. When danger looms ahead prudent companies defer major actions, including employee recruitment, until positive signs on the horizon give them confidence that the situation is not as bad as feared or the worst has passed.
This caution should not lead to overly drastic measures in the form of excessive budget cuts that may end up in a self-fulfilling prophecy. Therefore, it is essential that the business world gains confidence that the government is not only optimistic, but also is taking the right steps to prevent and mitigate the effects of a global recession, if that indeed eventuates notwithstanding best efforts.
On its part, as indicated earlier, business leaders should intensify internal communication. Just as we have expectations that the government has prepared measures to deal with a recession, company employees have the same expectations of management that it has prepared plans and is ready to deal with the worst-case scenario.
As is the case with crises in general, transparency and honesty in internal communication must be the guiding principles for any steps to be taken. In difficult situations employee support can be obtained only if they have faith and trust in the ability and integrity of the leadership.
Chairman & Chief Consultant, Kiroyan Partners
This article has been published in PR Indonesia magazine 93th edition issued on December 2022, page 64-65.
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