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V, U, L or W – what shape of global recession will we have?

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Who knew letters could be so important in determining our future?   Personally, I’m a keen advocate of V and less keen on U and W (and definitely L), and here’s why…

There was a great article in the Telegraph’s Business Pages today, so I take no credit for original research here, but with the rider that we don’t know what’s going to happen till it does, here’s a summary of what was said.

  1. The UK (and many others) could well see an unprecedented drop of 10% in GDP over the second quarter of 2020.
  2. We don’t know when this will end, but recovery will hopefully follow.
  3. Economists hope that the recovery will be rapid.  There was no systemic failure of the system as there was in 2009, so the economists hope that the turnaround will be V shaped rather than U or L shaped.
  4. The above depends on a) the health crisis abating after a few months. We are seeing this in China and also, hopefully, in Italy – but see point 5 below, and b) that the government’s measures protect as many good companies and jobs as possible.
  5. If we all self-isolate and then the virus comes back, we’re in for a W shaped cycle, with recovery, followed by a further downturn.

Finally, let’s end on an optimistic note. To quote directly from the Telegraph’s article… 

Economists expect a recovery this year. It means catastrophic forecasts for the second quarter turn into merely nasty predictions for 2020 as a whole. For instance, Goldman Sachs expects world GDP to grow 1.25pc over the year. That is painful, but not on the scale of the financial crisis. This would be less bad than the deep recessions of 1981-82 and 2008-09 but worse than the mild recessions of 1991 and 2001,” says Goldman’s chief US economist Jan Hatzius.”

“Douglas McWilliams at the Centre for Business and Economic Research thinks the UK should be back on its feet in six months’ time.”
Let’s hope they are right.

Chris Peace, MD, Peace Recruitment

If you want to see the original article it’s here.

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