Entrepreneurs and investors have been discussing the high chance of global economic recession for months due to the cumulative influence of inflation, pandemic, the shattering of international supply chains and the end of the cycle of quantitative easing that saw enormous amounts of money printed out of thin air.
The World Bank’s Prediction
2.9% growth in the global economy is predicted this year, down from 5.7% last year. This would amount to an almost 50% contraction in economic growth.
To make matters worse, the World Bank predicts that this lower growth rate will continue for several years as we deal with the aftermath of the war in Ukraine and continuing lockdowns in China which are both driving up the cost of everyday essentials.
Strategies for companies to avoid rising costs
In many countries, the “great resignation” hit SMEs hard after the nadir of the pandemic. Inflation is pushing many workers to ask for higher wages or change jobs. The international labor market is in a state of flux.
“Entrepreneurs and managers approach us daily explaining their struggles to hire staff locally. In the current environment, workers seem to be moving jobs and asking for more pay at an alarming rate, and who could blame them.” said Winston Ong, CEO of BruntWork.
“Many companies are seriously looking at relocating their teams to jurisdictions like the Philippines which have higher unemployment rates than many Western countries. Furthermore, labour cost savings of 70% or more are possible for most roles that are outsourced, from customer support, telesales and web development,” Ong stated.
Outsourcing alone won’t avoid recession. The World Bank hopes that supply chain operations and production around the world will resume to normal levels soon, but perhaps the genie is already out of the bottle.
Benefits of outsourcing
There are numerous benefits to outsourcing, says Ong. “The reduction in labor cost is an obvious benefit of outsourcing, but BruntWork’s clients report that hiring staff from the Philippines results in higher efficiency, the ability to increase trading hours or target new jurisdictions. The remote work experiment during the pandemic has made the option of relocating entire labour forces to the Philippines a more credible option,” he said.
Whether or not the World Bank’s prediction comes true, the word “recession” evokes scary images of the 2008 market crash and companies should do all they can in preparation for reduced spending in the economy and higher interest rates.