After more than 8 months with the Coronavirus
Covid-19 or the often simply labeled as Coronavirus, hit us like an unexpected tornado. What initially seemed to be a virus in China not more dangerous than the flu, became in a short while a pandemic infecting more than 16 million people worldwide and killing roughly 660.000 people. These figures are just a representation of the end of July and are expected to keep on rising.
Governments worldwide scratch their heads at how to balance the safety of their citizens all the while avoiding an economic downfall due to the closing of stores and restaurants.
As the coronavirus transmission rate stabilizes in a downward trend, countries slowly reopen their borders, restaurants, and stores. The question is, how will the effect of coronavirus on our economic landscape look like in the months or even years to come?
Prediction as a vague business!
Predicting the economy is like predicting if your wife is going to be in a bad mood. You can check the historical trends and you can try to foresee the upcoming trends, but there is a big portion of the unknown that plays a big role.
The main unknown factor in the Coronavirus case is how long it will take us to get this virus under control.
Economic predictions for the recovery of the Coronavirus pandemic
With most of the countries relaxing the lockdown rules, they have restarted their normal economic activities. Pubs, restaurants, and stores slowly reopen. Traveling remains restricted but most of the countries allow entry upon testing.
While the economy dipped during the lockdown, it sees a slow, albeit still lower, the rise of the economy now that everyone wants to go out after months of lockdown due to the coronavirus.
In this scenario, we predict that the world economy follows the footsteps of China. The Coronavirus gets contained quite quickly and does not re-emerge in the colder months, either control measures are effective, or because large groups have built an immune system against it. The economy picks up where it left off.
In this scenario, most economies would experience a mild recession of some 2-3% year-on-year but growth in 2021 would accelerate, returning most economies to their pre-crisis levels.
This scenario follows the start of scenario 1 but foresees a return of Coronavirus in the winter. Despite more testing and distancing rules, the virus forces most economies to go back into lockdown. It is difficult to predict until when this second wave will last.
What is for sure is that governments are now more experienced in dealing with the virus, measurements will be taken faster and probably some sectors can resume their activities in a quiet normal manner. After the second dip, the economy rises again around February – April 2021.
GDP growth would be lower in 2020 but higher in 2021 than in scenario 1. However, it may well take until late-2022 before most economies have returned to their pre coronavirus crisis levels.
In this scenario, the lockdown lasts until the end of 2020. Things slowly get back to normal in the second quarter of 2021, perhaps with the arrival of a Coronavirus vaccine. The full recovery will be faster and stronger than other scenarios since the virus will be fully under control. Nevertheless, this scenario underlies tremendous political and social turmoil, a situation that looks very unlikely at this moment.
In this scenario, most economies would experience an unprecedented and almost unimaginable contraction in 2Q20 of around 50% quarter-on-quarter annualized. The year 2020 would go down in the history books as the year with the most severe recession on record, seeing most economies shrinking at double-digit rates for the year as a whole.
The rebound in 2021 would be relatively constant. By 2023 economies have achieved their pre-virus levels.
What does this mean for your business?
As you understood, it is quite hard to predict how the virus will behave since it seems to be as unpredictable as your wife’s mood. But one thing is for sure: after each lockdown, a rise of the economic activity is to be expected. How strong the rise is and to which level the GDP reaches is open for speculation, but it is for certain that people want to go out and spend money once the lockdown is over.