The world economies are struggling right now with negative GDP growths for the past quarter and most expect it to be negative for the entire year. Economies are still grappling with the COVID-19 spread and trying their best to make something positive out of the current situation. Economists are working on efficient models to highlight how different recovery efforts might lead to different economic recovery trends.
The most common economic recovery trends being discussed are
1) Z-Shaped Recovery
The shape of the GDP curve goes in an inverted Z-shape – a dip in the GDP growth rate is followed by a boom of similar proportions above the original GDP growth rate and then everything normalizes to the original growth rate. This is the most optimistic approach to recovery and might be seen in very few economies.
2) V-Shaped Recovery
The shape of the GDP curve goes in a V-shape – the rate of the dip in the GDP growth rate is followed by a similar rate of recovery and then everything normalizes to the original growth rate. This is still an optimistic approach to recovery and might be seen in very few economies.
3) U-Shaped Recovery
The shape of the GDP curve goes in a U-shape – the rate of the dip in the GDP growth rate is followed by a period of lull before the GDP grows at a similar rate as the previous dip and then everything normalizes to the previous growth rate. This is a likely approach to recovery and might be seen in a lot of economies.
4) W-Shaped Recovery
The shape of the GDP curve goes in a W-shape – the rate of the dip in the GDP growth rate recovers a little before seeing another dip due to another wave then finally recovering to the original growth rate. This is also a likely approach to recovery and might be seen in a lot of economies.
5) L-Shaped Recovery
The shape of the GDP curve goes in a L-shape – once the growth rate dips, it stays there and continues at the lower level for the near future. This is a very pessimistic approach to recovery but is likely to happen for a few economies.
6) K-Shaped Recovery
The shape of the GDP curve goes in a K-shape – once the growth rate dips, different sectors of the economy recover at different growth rates resulting in some sectors recovering to higher growth rates than the original growth rate while other sectors recover to lower growth rates than the original growth rate. The overall state of the GDP growth line would depend on how the two sections of the K-line contribute to the rate of overall growth. This recovery model has gained a lot of popularity lately and is gradually being seen as the path for a lot of economies.
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