Tips for Beating A Recession

The question that most business people in Kenya are asking is whether the country has been affected by the recession in the developed world. And the answer is yes. Also the consequences for the country could be severe in a number of ways, key among them:

1. A reduction in foreign currency inflows from development partners as they try to rescue their own economies.
2. A reduction in foreign investments in the country as foreign companies adopt a wait-and-see attitude towards new investments outside their traditional zones.
3. A reduction in tourist visits by foreigners as they are likely to suspend spending.

The effect of the above factors are already being felt with the continuous weakening of the Kenya Shilling against the US Dollar. Since the country is dependent on imports of oil fuel and machinery, the cost of imports is likely to escalate, making the cost of manufactured goods to increase. The government will also resort to local borrowing to close the resulting budget deficit, resulting in higher interest rates in the country. The combined higher import costs and higher interest cost will translate into higher prices for goods and services. These high prices eventually result in lower demand as incomes for most people does not increase at the same rates.

What steps should one take to cushion against a recessionary economy?

1. Spending - reduce or avoid spending on luxury goods.
   
2. Avoid unnecessary travel
3. Avoid unnecessary telephone calls or keep calls short and to the point. May be it is also time to evaluate your mobile phone tariff or provider to ensure you are not incurring avoidable phone bills.
4. Invest in secure assets - such as treasury bills/bonds, land, buildings, etc. Avoid wasting assets such as motor vehicles.
5. Invest in the Nairobi Stock Exchange shares only if you can wait for at least 2 years for capital gains returns.