How long will it take for the global economy to recover?

The International Monetary Fund (IMF) estimates that the next global economy will shrink by 3%, in stark contrast to its previous prediction that the world economy would grow by 3%.

The world is preparing for the biggest global crisis since the Great Depression of the 1930s. But how long will this crisis last and how will it be overcome?  Many countries define a recession as a reduction in gross national product (GDP) for two consecutive quarters.  According to the National Bureau of Economic Research in the United States, the recession was "a sharp decline in economic activity that lasted for several months and was reflected in GDP as well as real income, unemployment, industrial production, and the retail sector." Is.  According to IMF estimates, we are currently experiencing the worst economic impact of the corona virus during the second quarter of 2020. He hopes things will improve in the second half of the year and businesses will slowly start to open up.

However, if measures such as lockdowns continue, businesses will end and people will lose their jobs. This recession can be doubly serious and protracted and even more difficult to get out of.

So we can go into a V, U, W, or L shape recession. Economists describe the different types of recession through these English letters. These letters describe the shape of the GDP graph. '

We consider V-shaped recession to be the best. It slows down the economy, quickly reaches its lowest point, and soon the economy begins to improve.  Jos ت Tsada, a professor at the Catholic University of Chile, says: "The idea is that our economy returns to normal and the recession is short-lived, even for a few quarters." "If we manage to control this epidemic, we will see a V-shaped recession because you will start to end the lockdown and the national product will start to grow back."

Paul Grunwald, chief economist at S&P Global Ratings in New York, says, "If social distance measures are eliminated soon or soon become a vaccine or a cure, we will soon be back on track."

The S&P forecasts a 9% economic slowdown in the second quarter of 2020. At this level, he thinks it will take a long time to get out of this recession.

According to S&P, 2020 will see an overall economic decline of 2.4%, followed by an increase of 5.9% in 2021.  "What we're seeing now is probably a U-shape or a wide U-shape in which we will recover from the effects of the crisis, but it will take time," says Paul Greenwald. Elena Dogar, associate managing director of Moody's Investors Services in New York, agrees. He estimates that traces of the corona virus will not leave the economy in 2021. "The economic activity we lost in the first half of this year, we will not be able to make up for it in the second half," she said.  However, she is positive about the news from China, where the slowdown and subsequent recovery began a quarter of a century earlier than in the rest of the world.  "We have seen a easing of lockdowns in China. Factories are up and running. There are reports in various sectors that production capacity has returned to 45 to 70 percent. Governments, on the other hand, have taken immediate steps to support economies.

Elena Dogar says things will get better in the second half of the year when measures such as lockdowns are removed and activities resume. But there is no vaccine or cure at the moment, and that's why we're facing another series of problems, "says Paul Grunwald. Governments can end measures such as lockdowns and try to support the economy. But in the event of a second wave of the corona virus, these measures will be reversed and the economy will suffer another blow.  In this situation, the economy could collapse once again, as the so-called W-shape. Professor Jose Tsada says that in such a situation, the crisis can only finally come out after a while, during which the economy improves but then starts to fall.  Paul Grunwald says that if we continue to take steps such as social distance, it will take a little longer for the economy to return to its normal level.  Many are also questioning whether the corona virus will set a new level of economic activity in the world.  In an L-shaped recession, the economy recovers after a sharp fall but does not return to its old level and returns to a lower level.

Professor Jose Tsada says that in such a situation it will not be a recession but a permanent change in world production.  S&P warns that uneven returns to global production could lead to long-term economic losses, especially if no vaccine or treatment is discovered.

Paul Greenwald says that in such a situation it would be impossible to return to the old system. The important question, instead of the V or U shape, is whether we will be able to return to the old level of production. And how long will it take? "