Introduction
An economic crisis is a situation in which the economy of the country meets a sudden downturn in its aggregate output of real Gross Domestic product (GDP).
The economy of a country experiences a sudden downturn characterized by a sharp decline in economic activity, widespread unemployment, and financial instability.
A long-term economic state characterized by unemployment and low levels of trade and investment.
Causes of economic crisis in a country
The economic crisis in a country is caused in many ways and its results affect different sectors like companies and other businesses.
1. Hyperinflation
The economic crisis is caused by hyperinflation. Hyperinflation is an extreme and rapid increase in the prices of goods and services within an economy. This leads to a situation where people rush to spend money as quickly as possible, exacerbating the inflationary spiral.
2. Stagflation
This also causes an economic crisis in a country. It is an economic phenomenon characterized by stagnant economic growth, high unemployment, and high inflation occurring simultaneously.
3. Exchange rate
The value of one currency relative to another. This determines how much of one currency can be exchanged for another. The exchange rate affects and contributes to the economic crisis of the country. For example, 1 United States dollar is Equal to 1733.64 Malawi kwacha i.e 1 USD = 1733.64 MK
4. Natural Disasters
Natural disasters are also a cause and contributing factor to the economic crisis of the country. These can be earthquakes, world fires, floods, etc, which can occur due to natural processes of the earth. For example, Cyclone Freddyhttps://reliefweb.int affected the economy of the country in the year 2023
How economic crisis affects businesses negatively
Economic crises affect businesses causing to decline in sales that can spiral as resulting layoffs further depress demand.
Economic crisis affects the business in making sales, businesses do not make good sales or profit, and most of the time it incur some losses.
Decrease in production or output. The company or a business fails to produce the required or the recommended products because of an economic downturn.
Reduced profits. As the economic crisis continues, consumers and competitors become wary when it comes to spending. This instills that a business or a company might fail to produce and generate its usual sales and businesses or companies do not produce new products.
In conclusion, the economic crisis of the country affects many sectors in the country including business sectors. This results in unemployment and affects the livelihood of business people.
