The alphabet soup of economic recovery

U, V, W or L?

13 May 2020 | Ekonomie
Antonio Rodriguez



What will the economic recovery from the coronavirus crisis look like in different countries?

U, V, W, and L-shaped recoveries all describe a brutal drop in economic activity since the coronavirus struck China at the beginning of the year. From there they outline different scenarios of how what the IMF has called the worst recession since the Great Depression could play out.

After the plunge provoked by the lockdown orders, economic activity slides into a trough for a period. That is due to sectors such as tourism and entertainment being more durably hit and requiring more time to adjust. But a recovery then gradually takes hold, before accelerating sharply.

The IMF saw this as a possible scenario for the world's advanced economies, which have been hit the worst. In its updated forecasts released last month it sees them recovering much if not all of the drops suffered this year.

But such a recovery will depend on the absence of a severe second wave of the epidemic that would force countries to reimpose lockdowns.



V is for victory

A V-shaped recovery is the best: a sharp drop followed immediately by a correspondingly sharp recovery. The government-paid leave programmes in some countries that have kept people formally employed are aimed at supporting such a recovery as workers will have income to spend.

But the longer lockdowns and the crisis last, the less likely such a version becomes.

That doesn't mean that you can't hope: the Bank of England expects a 14% contraction in the economy with a 15% rebound next year.

The IMF sees a V-shape recovery for emerging and developing countries overall, with a 1.0% drop followed by 6.6% rebound.

A brief recovery followed by a relapse before a sustained return to growth is not unusual. This was the experience of the eurozone following the global financial crisis in 2008. A gradual recovery was cut short as investors began to worry about the debt levels of Greece, Italy and Spain.



W means second wave

Economists see a W-shaped recovery as likely if a strong second-wave of the coronavirus forces countries to adopt strict lockdown measures once again.

This would be the worst possible outcome as it describes a failure to recover from the crisis. After a plunge in output an economy stagnates. In this case it would mean a wave of bankruptcies followed by a long period of widespread unemployment.

Such steps down in economic output are not unheard of - think of Japan's lost decade that began in the early 1990s when falling prices kept the economy from growing.

Think of the swoosh logo of US footwear firm Nike - a drop followed by a long, gradual return higher.

This is a scenario many advanced countries could follow as the IMF is already forecasting that their growth next year will fail to fully compensate for the falls they suffer this year.

– Nampa/AFP

Soortgelyk

 

Beweerde aanrander vry op borg

5 ure gelede | Howe

Jeanette Diergaardt – Mnr. Samuel Shikale, wat na bewering ’n vroulike winkelassistent Sondag by Pick n Pay Mega Centre in Klein Kuppe aangerand het, is...

Britte bring grendeltyd op Kalahari-duin deur

5 ure gelede | Gemeenskap

Ronelle Rademeyer – As dit nie vir die Covid-19-pandemie en die wêreldwye inperkingsmaatreëls was nie, sou ’n Britse egpaar nou al halfpad deur Afrika op...

Air Namibia kan vlieg ná nagtelike interdik

5 ure gelede | Vervoer

Ronelle Rademeyer – Air Namibia kon Woensdagnag daarin slaag om in die hoërhof in Windhoek ’n tussentydse hofbevel te kry wat die Vervoerkommissie van Namibië...

Okahandja se water lol weer

5 ure gelede | Regering

Denver Kisting – Die uitvoerende hoof van die Okahandja-munisipaliteit, me. Martha Mutilifa, het die afgelope week erken die tuindorp gaan opnuut gebuk onder waterprobleme.Dít kom...

Nog 20 gevalle vir Walvisbaai

5 ure gelede | Gesondheid

Henriette Lamprecht Namibië se aantal bevestigde Covid-19-gevalle het gistermiddag op 615 gestaan, nadat nog 22 gevalle die afgelope 24 uur in die land aangeteken is....

Weer vir 10 Julie 2020

5 ure gelede | Weer

WEERWAAK: Baie koue, winderige en reënerige toestande word in die ||Kharas-, Hardapstreek en westelike plato verwag. Yskoue weer sal Saterdag oor die sentrale en oostelike...

LPM vaar uit teen ‘Animal Farm’

5 ure gelede | Regering

Denver Kisting – Die Landless People’s Movement (LPM) sê by monde van sy nasionale woordvoerder, me. Sade Gawanas, die manier hoe daar op kritiek teen...

Vegter vir robbe

5 ure gelede | Omgewing

Tanja Bause – “Ons sit met ’n reuseprobleem. Ons moet iets doen en vinnig ook,” sê Naude Dreyer, die man agter Ocean Conservation Namibia (OCN)....

Honde trek menige wildstropers vas

5 ure gelede | Omgewing

Francoise Steynberg Die vyf honde wat in 2017 deur die ministerie van die omgewing, bosbou en toerisme ingespan is om met teenstropery te help,...