The UN Sounds a Global Recession Warning. Here's How You Can Prepare

Report warns upcoming crisis could be worse than the Great Recession of 2007-2009.

The United Nations is the latest body to warn that tough economic times could be on the horizon. Earlier this week, the UN Conference on Trade and Development (UNCTAD) sounded the alarm bell on a global recession. It said the impending economic crisis could be worse than the one we experienced in 2007 to 2009. It called on global leaders to change direction now to avoid worldwide financial disaster.

The UN's recession warning

The good news is that the UN does not think a recession is inevitable. It warns that economic growth worldwide could slow to 2.5% this year and fall further to 2.2% in 2023. But it also says governments can prevent the slump by changing policies. "There is still time to step back from the edge of recession," said UNCTAD chief Rebeca Grynspan.

According to the UN, interest rate hikes have an outsized impact on the most vulnerable people in our society. Raising rates makes life harder for those who carry debt, wherever they live in the world. Rather than increasing rates further, the UN wants organizations like the Federal Reserve to find other ways to curb inflation.

The next meeting of the Federal Reserve is set for November, and many economists expect it will announce another 0.75% rate hike. There's still a few factors that could prompt it to pull back on its economic tightening measures, such as a change in the direction of inflation or a significant drop in job openings. But right now, markets are braced for another jump in rates, even though that could also trigger a recession.

How to prepare for a recession

The last few years have been extraordinary by anyone's standards. We'd no sooner put the worst of the pandemic and related shut downs behind us than along came sky-high inflation and even more pressure on our bank balances. If your budget is already stretched thin, the idea of preparing for a recession may seem impossible. You're not alone -- a Bankrate survey showed that around a third of Americans are suffering from recession fatigue.

Unfortunately, putting your head in the sand today could create more issues further down the road. You may not be able to completely recession-proof your finances, but any progress you can make toward the following goals now could help.

1. Build up your emergency savings

Many financial experts recommend putting three to six months' worth of living expenses aside to cover unexpected financial hiccups. If a recession does hit, there's a chance a lot of people will lose their jobs. If it happens to you, having extra cash in an accessible savings account could help you cover your rent and bills while you look for a new job. If saving up three months' worth of living expenses seems like an impossible prospect, save what you can.

2. Pay down debt -- and try not to take on any more

The current economic situation presents a kind of double whammy. People are taking on debt to keep up with rising prices, but the Fed's efforts to stop prices from rising further makes that debt more expensive. Higher interest rates mean you could pay higher interest rates on any loans or credit card balances. If your financial situation worsens, any monthly debt payments will eat into your available cash.

If you carry high interest credit card debt, the first step is to figure out how you're going to pay it off. You might decide to focus on the smallest balances first to get a psychological boost when you pay them off. You might put all your extra cash toward balances with higher interest rates. If the amount you owe seems impossibly high, try to break it down into achievable goals.

3. Reach out to your network

Don't wait until you're in a tight spot job wise to reconnect with old colleagues. It's far better to touch base with potential work contacts now while the job market is healthy than to do it when you actually need help. Now's also a good time to brush up your resume and see if there are any professional skills you might be able to improve. There's a host of online courses, books, and resources available and it shows a potential employer that you're keen to learn new things.

We've survived recessions before

The prospect of a recession can be scary, but it's worth remembering that they are part of the economic cycle and they don't last forever. Any steps you can take today will make it easier to weather the storm, especially if you're able to earn some extra cash while the job market is strong. Even if you can't build up a big emergency fund or pay off all your debt, every dollar counts.