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What Will Be the Economic Recovery Shape?

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What Will Be the Economic Recovery Shape?

The world economy is crumbling due to the COVID-19 pandemic. What shape will the economic recovery take?

  1. V-shaped: Some more optimistic economists predict the recovery to take the shape of a V where the economy suffers a sharp economic decline, but quickly and strongly recovers.
  2. U-shaped: Also a bit optimistic. It is longer than a V-shaped recession. The economy gradually rises back over time.
  3. W-shaped: This is also called a double-dip recession where the economy drops twice prior to full recovery.
  4. L-shaped: This is the worst case scenario where there’s no sight at end for return to normal. It’s unclear whether the businesses will ever recover.

These are some common recovery shapes that economies around the world have historically experienced. Some unusual shapes have been predicted for the economic recovery during the COVID-19 pandemic.

There is a high possibility of a Nike swoosh shape where the economy starts to bounce back sharply as restrictions are lifted but consumers, government and businesses are hesitant to spend. Hence, it will take a long while for the economy to get back to normal.

A most optimistic predicted shape for recovery from the current recession is the Z shape where the economy will see a temporary boom as a result of pent-up demand after the downturn. In this scenario, a good part of the GDP foregone during lockdowns—the shopping we didn’t do, the restaurant meals we didn’t enjoy, trips we didn’t take—was simply delayed, and is made up once the risk from the pandemic passes. (Brookings.edu)


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