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What is economic recovery going to look like post this pandemic - UPDATED




There is rampant speculation about how the global economies could recover after the Covid 19 crisis is over. First of all, it is very unclear when countries are even able to start the recovery process and how much damage has been done from the health and thus induced economic crisis. Here are my three scenarios which I drafted on March 22, 2020. I recently added another scenario on April 15th 2020.

Let me also say that it is much more important in my mind to make sure that the health crisis is foremost tackled to save as much lives! #Blib Dihei

Keep in mind these are speculations:

1) U-Shape recovery with overshooting due to consumers getting back into spending quickly. Spending is done more aggressively than anticipated and the GDP growth rate may top pre-crisis level in the very short term. The growth rate will then revert back to the steady state fairly quickly. This scenario is a wishful thinking but could potentially happen. Recovery would come in the 3rd quarter after the 1st and 2nd quarters took a sharper hit

2) L-Shape recovery with a very long time to get out of the slump we may find ourselves in today. Economic growth is not expected to pick up before the 4th quarter of 2020. This is indeed a worst case scenario but could be realistic given that many countries have been in lock down for a while. The recovery is like a heavy bird (airplane) taking off very flattish from the runway. Steady state is not reached for quite a while (2021 or 2022)

3) U-Shape recovery yet without the overshooting component. The economy starts to recover in the 3rd quarter of 2020 with positive growth rate again yet not a growth rate that mirrors the pre-crisis clip. The ramp up back to steady state growth rate will take quite a while. 3) is a combination of 1) and 2)

Added Scenario on April 15th, 2020:

4) UL-Shape scenario which includes a component of 1) and 2). This means that the economy could recover with an initial overshooting as consumers are creating a surge in demand for products and services. However, after that initial surge is over, the economy will worsen again grow negatively. The recovery will take a long time and is likely to be in Q1 of 2021.



Enjoy ...
Macroman and Dr. Math ...!

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