2019 and the ensuing years have been difficult. COVID–19 redefined how we should survive and thrive – not just in our health, but more importantly our finances too.
Award-winning financial advisory Consultant and B&FT Financial Wellness columnist Richmond Kwame Frimpong has proposed a smart, simple instructional guide on how to survive the current economic crises all face (Country, Corporates and Citizenry) in his book – Good Money Habits in Bad Economic Times.
Economic Crises are generally characterised as significant deteriorations of economies over a long period outside the acceptable indicators of change. During global economic crises, the economic performance of countries sees a decline in production and demand, rising unemployment and bankruptcy of businesses.
This results in increased poverty levels globally. When an economic crisis is devastating and prolonged, there is a depression. When it is devastating but not prolonged, it is a recession. Recessions and depressions are similar. In both cases, the economy declines and unemployment rises. However, a depression is more severe and usually longer-lasting.
The current global economic crises are a result of the lingering impacts of COVID-19 economic downturns and supply chain disruptions, the Russia-Ukraine war, inflation, global food and energy shortages, debt crises in developing countries, and unwinding asset bubbles in the Americas, Europe and Asia.
Scanning through economic history, this is comparable to the Great Depression of 1929-1939 which is considered the worst economic and financial disaster of the 20th century and was caused by the Wall Street crash. Next is the OPEC oil price shock of 1973.
Then came the Asian crisis of 1997 – also known as ‘Asian-flu’ – which began in Thailand, spreading to East Asia and its trading partner; and the most recent 2008 financial crisis can be considered as dominant examples.
The difference between the COVID-19-induced global economic crisis and the ones cited above from 1973 to 2008 is that COVID-19 resulted in a global triple-shock; simultaneously covering demand, supply and financial disruptions.
Ironically, before COVID-19, the world was facing growth uncertainty and there was a tendency of reduction in global output. This uncertainty created conflict among different global economic giants, and those conflicts negatively affected the world macro-economic indicators and shrank global growth and trade volumes.
The International Monetary Fund (IMF), for instance, warned that “the US-China trade war will cut global growth to its slowest pace since the 2008-2009 financial crisis”. Additionally, in November 2019 the Financial Times highlighted that “because of trade tensions, the global trade balance shrank 1.2 percent”.
In 2020 the global economy was estimated to have shrunk by about 5.2% – representing the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870. Additionally, economic activity among advanced economies dipped by about 7% in 2020, as domestic demand and supply, trade and finance were severely disrupted.
Emerging market and developing economies (EMDEs) like the African continent equally experienced their first contraction in at least sixty years. Per capita incomes declined in excess of 3.6% – dragging millions of people into extreme poverty.
Unlike a financial crisis that is limited to one sector, an economic crisis affects the whole economy. Unemployment rises, GDP (which is the sum of everything a country produces over a specific period) stops growing or shrinks.
This dries-up liquidity, and in the case of COVID-19 plus the Russian-Ukraine war it resulted in global food and energy shortages, debt-crises in developing countries and hyperinflation.
The effect is that many get poorer, and the only way out is financial prudence and frugality through the application of ‘Good Money Habits’.
So, what do we do in these difficult economic times to avoid a financial crisis?
First, analyse your current financial reality by taking the two-level money habit diagnostic test to determine your present situation.
Secondly, practice the 21 new money habits in the book – Good Money Habits in Bad Economic Times, based on your diagnostic test outcome.
Finally, sign up to the 21-day new money habits’ worksheet he provides to keep one in motion with one’s daily routine and help stick to the good, new money goals and strive daily toward improvement.
About the Author
Richmond is an award-winning financial advisory, trade and investment promotions’ practitioner with 16 years of enterprise leadership – spanning financial services, international trade, technology, social enterprise and transformation consulting.
In the financial services universe, he has supervised significant industry growth-poles under banking, pensions, insurance and investments. Notable among these is leading W/Africa’s premier Investment Bank to achieve their largest regional AUM in record time.
Under Pensions Administration, he supervised one of the biggest Trustee Acquisition and Merger transactions to transform four struggling Pension firms into one thriving industry leader in under 24 months. Under Banking and Insurance, he implemented disruptive national savings campaigns as ‘an industry first’.
As the Chief Executive of Pan Africa Technology Company, he led the implementation of sub-Sahara Africa’s Economic Integration through digital addressing.
As a Management Consultant, he has managed strategic business transformation projects for MNCs, Country Trade Chambers, UN Agencies and Development Finance Institutions from origination to execution.
Recently, Richmond received recognition at the Global UN-ITU Awards for building the Best Business Model and Social Impact Organisation.
Currently, he is leading Africa’s foremost industrial transformation effort across ASEAN (+3), EU, UK/US, China, India and Japan via Special Economic Zones with FDI values of about US$3.4b – plugging into the AU 2063 Agenda.
He doubles as Advisory Board Chair of Pan African fngo, driving the strategic mandate of SDG 1 across 46 countries.
Richmond is a product of the University of Ghana, Paris School of Business, Cal University and the Harvard Business School (HBS Executive Education).