The Economy After the COVID-19 Pandemic

The economy is being massively impacted by the COVID-19 pandemic.

But that impact isn't just going to stop overnight.

In fact, reverberations caused by COVID-19 in finance, business, and the labor market are likely to dictate the course of the economy for many months, quarters, and years to come.

Current Recession Forecasts

The International Monetary Fund (IMF) lowered its forecasts for global economic growth in the World Economic Outlook (WEO) it released on 14 April 2020.

While total 2019 GDP was +2.9 percent, the April 2020 IMF growth forecasts were lowered for 2020 to -3.0 percent from +3.3 percent. The IMF forecasts for 2021, however, were raised to +5.8 percent from +3.4 percent to reflect a period of recovery. You can see this in Figure 1.

Figure 1

Additionally, the IMF WEO report showed the United States is still likely top have one of the relatively smaller recessions of advanced economies in 2020, which could still support the dollar as a flight to quality, despite all of the fiscal policy stimulus and monetary policy stimulus currently being implemented by the U.S. government and the U.S. Federal Reserve, respectively.

This is an economically bearish report. Plus, as I have often noted, the IMF is notoriously optimistic in its forecasts that often need to be revised lower.

Negative per Capita Growth Widespread

The IMF report also showed forecasts of negative per capita growth. This is deflationary - and it is likely to impact almost every country in the world.

In fact, the level of negative per capita growth appears likely to exceed the prevalence seen during the great recession — even if the duration is predicted to be more short-lived. You can see this dynamic in Figure 2.

Figure 2

This means that the COVID-19 recession may not be as long as the recession in 2008, it certainly appears to be more severe - and more impactful for more people in the world.

Slow World GDP Recovery

The IMF WEO report also included Quarterly World GDP forecasts, showing that advanced economies are likely to experience a bottoming of growth in Q2 2020.

But based on the IMF report, GDP for overall advanced economies seems unlikely to be back to flat — back to pre-pandemic 2019 Q1 levels — by Q4 2021. This forecast shown in Figure 3 underscores the potential for a very slow recovery to pre-pandemic levels for advanced economies.

Figure 3

The Future of Recession

We are likely to see recessions continue to occur in the future. After all, the economy is called a business cycle for a reason.

And each recession casts a shadow decades into the future — especially for people's careers.

I’m an economist today because I got caught in the 2001 recession and my ignorance of the economy put me in a bad place.

Now, almost 20 years later, I’m an economist and a financial futurist, spending almost every minute of my working life analyzing the financial systems around us as well as analyzing dynamics that could shape our world in the long run.

In the same way that the 2001 shaped my future career, COVID-19 will shape the future careers of many people.

Thinking About the 20-Year Shadow of COVID-19

If we think about recessions and career planning, it is important to consider that people always want options. And in recessions, options get taken away.

The countervailing impact then, is that people push to find ways to prevent future job loss — and to create more future professional options for themselves. This is why I expect the pattern seen in the long-term impact of the 2001 recession on my professional development is something we will see again.

As a result of COVID-19 — and a potential ensuing recession — we are likely to see an entire generation of young people watch this unfold and make decisions to create options.  

While I became an economist after the 2001 tech bubble, the nature of COVID-19 and a recession that stems from it seems likely to inspire more people to go into healthcare or to get remote jobs — or at least jobs that could be remote.

And while this recession impacts and shapes their careers, it will also very likely impact labor dynamics, access to credit, general business practices, and the growth path of the entire economy for decades to come.

The Future After COVID

This article is an excerpt from Jason Schenker's The Future After COVID, which was released on 1 April 2020 and has been the No. 1 New Release for Macroeconomics on Amazon. This article also includes excerpted material from Jason Schenker's book Futureproof Supply Chain, which was released in February 2019.

The Future After COVID is online here: www.FutureAfterCovid.com

Jason Schenker is one of the world's leading futurists. He is the Chairman of The Futurist Institute and the President of Prestige Economics. He has been an economist for over 15 years and he is also a finance and economics instructor for LinkedIn Learning.

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