The COVID-19 Recession

September 22, 2021

The National Bureau of Economic Research defines a recession as a significant decline in economic activity spread across the economy lasting more than a few months. A recession is normally visible in the real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales.

A recession is also said to be when businesses cease to expand, the GDP diminishes for two consecutive quarters, the rate of unemployment rises and housing prices decline.

Currently, though a recession has not yet been officially declared, it is evident that the entire world is headed for one. This is as a result of the 2020 COVID-19 pandemic that has spread throughout the whole world is affecting several economies severely compared to others. The pandemic which took the whole world by surprise has crippled almost every industry in every country ranging the stock exchange markets, Aviation Industry as well as the oil industry which has recorded its lowest oil prices since the early 1900s.

This is due to the lockdown measures that have been issued by the majority of the countries in the effort to curb the spread of the virus. The negative impacts of this are more in a short time but for a country like Uganda, the positive impacts lay ahead in the long run. Due to this pandemic, businesses have been forced to close as a result of the national lockdowns.

Economically anticipating into the future, business, firms and industrial lockdowns are leading to low levels of production as employees have been forced to stay home. The decline in levels of production will consequently lead to low levels of revenues for the businesses. Low revenues will force employers to lay off some workers as they might not be able to fully facilitate them and lower wages for those that stay in order to reduce the cost they incur. This was seen during the great recession of 2009 which mainly affected the financial sector and caused many people to lose their jobs and this led to very high levels of unemployment, banks saw large-scale losses and falls in profit and it hit the housing sector hardest.

With high levels of unemployment, low levels of income are bound to be realized by nations and this will not only increase poverty but also widen the income inequality gap. With the high levels of unemployment, low rates of production and output, low incomes for individuals and a decline in retail sales, Nations are going to realize a drop in the Gross Domestic Product which is the major indicator of a recession.

Uganda Revenue Authority had a target of collecting 21 trillion in the 2019/2020 financial year. However, the COVID-19 measures frustrated the collections after raising only 15 trillion leaving a balance of 6 trillion. The recession will also lead to an increase in government borrowing as a result of the fall in the tax revenue in order to cover up the deficit accumulated as a result of the pandemic.

This is because firms make less profit, therefore the government will receive lower corporation tax, workers will receive lower incomes, therefore the government will receive lower income tax, lower house prices and fewer housing transactions lead to lower stamp duty revenue and lower expenditure will lead to lower VAT payments. It can be viewed, all the major indicators of a recession move in a cycle and that is why a recession is part of the business cycle.

However, from the view of several economists, the COVID-19 recession is mainly bound to affect low-income earners in the leisure and tourism sector more than the rich people in other sectors. Consequently, a recession is not all bad and that is why it is part of the business cycle. One way or another, it is bound to be realized by economies and it has some positive implications that come out of it such as an increasing inefficiency.

Therefore, some companies industries especially those who offer services online and employees who are able to work from home are however bound to benefit from this recession. Sail Global Corporation, a private entity online offering Business, Advisory, Insurance and Innovation services is therefore bound to benefit from this recession and this is how.

1.With the pandemic that is not just going to be gone at once, people are bound to be cautious of walking into places and companies to conduct business. Therefore, if one can access the services they need online, that will greatly simplify their lives and they will not have to expose themselves in order to acquire a service. Take for instance a company that needs advisory services on a certain contract they are engaging in. They can simply log onto the Sail Access website and set in an application for the service that they require and Sail Global Corporation will respond respectively. This will encourage the continuity of businesses and it will enable people to keep earning regardless of the current world state.

2.During the recession, Legal services are highly marketable for various reasons such as people will need legal advisory on how to manage their assets, individuals selling the property will too need legal contracts drawn out for them, employees that have been illegally laid off work without benefits will too need legal services and so many others. Sail Global Corporation, therefore, has an opportunity and window to exploit the market by offering its legal services.

3.With the technology and Innovation department at Sail Global Corporation, during the COVID-19 recession, innovations and developments for various companies can still be conducted and carried out as these services can be remotely offered. Therefore, potential clients can put in their service applications through Sail Access and the services they require will be diligently delivered to them.

It can therefore be seen that midst of this crisis, Sail Global Corporation can strive as a business and actually benefit from the recession caused by the COVID-19 pandemic.

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