CEO Bill Nelson on Three COVID-19 Economic Recovery Scenarios

The economic impact from novel coronavirus has begun to manifest itself over the last several weeks. In the U.S. alone, nearly 10 million people have applied for unemployment benefits. There are many questions about the economic impact of the COVID-19 pandemic in the short and long term.  

Austin Kimson of Bain & Company’s Macro Trends Group published a memo, as of March 27, of three possible economic outlooks: fastest, moderate and slowest recovery. All are sobering and suggest that whenever local shelter-in-place orders are lifted and the economy begins to strengthen, we may still not see a rapid return to normalcy in our lives. Each recovery scenario relies on contingent actions to come true, but as Kimson writes, the Macro Trends Group “filters current information through the lenses of science, policy and economics to anticipate what could happen.” I’ve summarized the groups analysis and present it to you to help inform your business plans.

Fast Recovery Scenario

Bain’s fastest recovery outlook sees a strengthening third quarter in the U.S. and strong fourth quarter in Europe and the U.S. The pre-pandemic economy would not return until the beginning of 2021. Some things that would need to happen for this recovery option:

• At least one effective treatment needs to emerge no later than September 2020

• Social distancing in the US continues until at least May

• Domestic transmission rates mirror South Korea or Japan- major cities or hot spots may need longer periods of social distancing than other regions

• Group events remain prohibited until an effective treatment becomes available

• Aggressive testing begins

• Cross-border air travel remains limited

• The Chinese supply chain fully returns in May- may see some continued impact but nothing major

• Hospitalization of younger/healthier people creates a hesitancy to return to pre-pandemic activity until a treatment is available (this is true for all three recovery scenarios)

Moderate Recovery Scenario

Kimson and his team define the moderate recovery outlook as roughly 85% of pre-pandemic economic activity until at least Q1 of 2021. In this recovery:

• The U.S., Europe and Asia have periodic shelter-in-place orders for most of the year.

• Developing markets are recovered by September

• Global travel remains “highly constrained” throughout the year

• An effective treatment/vaccine is not available until 2021

• Further government support of the economy is required

• Hospitalization of younger/healthier people creates a hesitancy to return to pre-pandemic activity until a treatment is available

Slow Recovery Scenario

The slow recovery is outlined as more than a year of “repressed economic activity.” In this recovery:

• Emergence of an effective treatment or herd immunity is the only end point of the crisis and either option takes a year

• Strong controls continue to be necessary to allow hospitals to remain effective

• Some level of historically wartime economic structure is required in which the government influences production and prices   

I roughly outlined Bain & Company’s scenarios for economic recovery, but I encourage you to read the full memo for intriguing analysis on how the pandemic will impact specific economies and geopolitics in general, including pandemic stressors on the EU as nations turn inward, and supply chain diversification out of China. Contact Pat McGlone (pmcglone@grf.org) or me for a copy of Bain’s memo or a cross-sector impact analysis by Global Resilience Federation staff, available as TLP White. 

Originally published on LinkedIn.