The post-COVID-19 recession been predicted seem to be catching up already with companies as South African airline nears official bankruptcy.
Economy experts has in the recent weeks been predicting that the world’s economy would fall into recession at the end of the coronavirus pandemic.
Not all recessions are created equally. Neither are the recoveries — and the biggest financial fear is that the current economic slump will last long after the coronavirus is contained.
Economists often say recessions take on shapes. A “W”-shaped recession is a double-dipping downturn, with the financial system bouncing back but falling again. A “U” form means lower-for-longer, while a “V” means a sharp decline but an equally strong snapback.
That “V” was the ultimate hope when the coronavirus first started spreading in the U.S. Stay-at-home orders were soon issued to keep as many people at home as possible. As retail stores, offices, gyms and bars closed, the economy naturally came to a sudden stop. But there was a silver lining: The economy would surely pick back up where it left off, once those shelters in place were lifted.
Then the forecasts started rolling in. And the data looked bleak. Economists at the Federal Reserve Bank of St. Louis said unemployment could top 32 percent. Goldman Sachs expects an unprecedented 24 percent contraction on an annual basis, while Euler Hermes sees a 30 percent plunge.
The International Monetary Fund (IMF) said Tuesday the global economy will suffer the worst economic crisis since the Great Depression. Meanwhile, the Congressional Budget Office (CBO) said it expects unemployment will remain elevated until 2021. All of this suggests that the return to normalcy could happen later — rather than sooner.
“What I’m seeing here is a depression-like shock without a depression,” says Joe Brusuelas, chief economist at RSM. “We’re not going to flip a switch and the economy is going to open back up at once. It will take some time to ascertain where the longer-lasting damage is.”