Preparing for the economic downturn

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An honorable member of the Coffee Shop Has Just Posted the Following:

Dear Mr. Tan
An economic downturn looks quite likely, especially in Singapore. We are affected by a weak global economy and weakness in China, but we also have our domestic factors to make the problem worse, especially in the property and new car sales.

What should ordinary people do to cope with the likely recession and increase in unemployment?

REPLY
From an individual perspective, it is time to reduce spending and to increase savings. If you lose your job, you have some savings to tide over the difficult time.

From a social perspective, this "increase saving" will cause further problems to a weak economy. If too many people cut down on their spending, the economic will weaken further. The businesses that depend on consumer spending will be badly affected. Many will have to close down. This will cause a spiral effect.

A government can help to cushion off the impact by reducing interest rate to help the businesses to survive. The low interest rate may encourage the ordinary people to increase their spending, but this is not likely to happen due to the uncertainty in the economy.

Interest rate is very low in Singapore now. A further reduction in interest rate will not help to reduce the business cost.

I guess that it will be more difficult to manage the economic downturn in Singapore. It might help if the government decides to give a monthly cash allowance to workers who are retrenched during the downturn. It is an unemployment benefit, but it should be considered for the short term.

http://tankinlian.blogspot.sg/2015/1...-downturn.html


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