Economists predict predictions for how the economy might recover post COVID-19

April 17 15:02 2020
Economists predict predictions for how the economy might recover post COVID-19

More than 50 economists from different parts of the world have expressed their prediction for economic recovery after the COVID-19 pandemic. This is according to a poll by Reuters, with the predictions ranging from a shrink as much as 6%, to 0.7% growth.

Predictions for economic recovery after the pandemic and the lockdowns have continued to throw up a medley of letters to indicate whether a bounceback, a slow-burn recovery or relapse can be expected.

Carsten Brzeski, global head of macro at ING Research, described the picture as “a virus-driven ice age”.

It is an abrupt stop of economic activity, from 100 to zero in just a few days or weeks,” he said, adding that made it extremely difficult to forecast the outlook.

Some of the hugely debated scenarios are highlighted as follows:

1. “V”

The best case outcome: when a growth plunge is followed by an equally sharp recovery.

The April-June GDP contraction will likely be on a scale not seen for decades. However, fiscal and monetary stimulus, currently at over $10 trillion and counting – could aid an equally rapid rebound.

Ross Walker, co-head of global economics at NatWest Markets, agrees the scale of economic decline expected this quarter implies “a sizeable rebound in Q3 and Q4 as businesses re-open.”

2. “U”

This is when recovery takes more than a couple of quarters. Considering that economies have suffered a faster and deeper contraction than in 2008-09, this is the most likely outcome.

Easing of the lockdown measures will be gradual, social distancing will continue and the tourist industry will likely continue to suffer,” ING’s Brzeski said.

3. “W”

Double-dip – if the easing of lockdown restrictions initially boosts activity. However, the effects of unemployment and corporate bankruptcies start to filter. This could happen if new cases of the coronavirus emerge.

4. “L”

When growth plunges and fails to recover for some time. This requires the global coronavirus tally to continue rising, forcing longer lockdowns.

Considering that Wuhan ended lockdowns after just over two months, this scenario is unlikely to play out. However, emerging markets less able to engage big stimulus and often rely on commodity exports could experience such outcomes.

5. SWOOSH

Neither L nor U nor V, will do. Instead, we look for a tick mark-style profile,” Berenberg economist Florian Hense said. This means a sharp downturn and subsequent gradual recovery as lockdowns are eased more gently than they were imposed.

AXA Investment Managers group chief economist, Gilles Moec, has pictured a “swoosh” shape.

With consumer spending possibly impaired by a higher propensity to save and serious potential curbs on investment, we think the likeliest scenario is for the world economy’s rebound post lockdown to be quite soft,” Moec said.

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