The spread of COVID-19 has been unabating so far having accounted for nearly 300K deaths and infecting several millions . If the data sources are to be believed , no other nation with a notable exception of China,Japan and South Korea is able to “fend off” the virus,yet. With no vaccine or cure readily available, the policy makers across the globe are actively looking to lift the lockdowns and encourage “economic activities” with “great degree of uncertainty and fear”.
The new motto: Learn to live with the virus- serves as a perfect prelude to kickstart the economy. The world is facing its worst recession since the Great Depression of 1930s and the governments and policy makers are reeling under pressure to restore the economic normalcy.
Will the recession last for several years or be a quick turnaround? Can the world expect more shocks ? Is there a ‘new normal’ in place? What could be the mode of recovery? Will it be a V shaped or “Swoosh” shaped recovery? As the economies reopen, the answer to these questions would be more clear. Though the early signs of recovery from China pose a little encouraging if not an optimistic picture.
Let’s try to find out the “best possible” recovery method that can be attributed to the global economy amidst COVID19:
- V Shaped Recovery: V-Shaped recovery involves a sharp decline in metrics followed by a sharp rebound to the pre-recession levels. With mostly every industry being battered, a V-shaped recovery can be ruled out in the short term.
2. U- Shaped Recovery: U-shaped is defined by a longer trough. This can last several quarters before the green shoots emerge. The recovery is rather undefined than compared to sharp rebound in V shaped recovery.
3. W-Shaped Recovery: W-shaped recovery is characterized by a period of extreme volatility. It can be best summarized as recession-recovery-recession.
4. L Shaped Recovery: The slow rate of growth and persistent unemployment are the hallmarks of a L-shaped recovery. The economy may never be restored to its pre-recession level.
5. Swoosh Shaped Recovery: The recovery best resembles the Nike logo and is characterized by longer duration of economic growth. It’s longer than the V-shaped recovery and slower than a U shaped one.
The massive impact of Covid-19 on sectors like hospitality,airlines and real estate and its cascading effect on many others severely dims the prospect of a V-shaped recovery. As the virus lingers on and the new social distancing norms take effect, the economic recovery might be a painful one atleast in the short to medium run. In these uncertain times one cannot rule out a U or a Swoosh shaped recovery. Or a new lexicon be added to the economic dictionary?BEHOLD!