9 scenarios suggest the recovery of the world economy after the Coronavirus

On 13 April, the international consulting firm McKinsey drafted a new document to help business leaders understand the emergency situation caused by the COVID-19 and its possible development and support them in taking measures to safeguard their business. Although aimed at businesses in a broad sense, the analysis made can also be applied to the tourism sector as it is inextricably linked to other sectors of the world economy.

The document explores 9 possible scenarios that could occur depending on how the pandemic will be managed, represented by 9 graphs depicting the recovery curve of the world economy. In order to outline these scenarios, the variables taken into consideration by the American society are 2:

  • The spread of the virus and public health responses, a variable divided into 3 degrees of effectiveness;
  • The knock-on effects of the virus and the responses in terms of economic policy, a variable also divided into 3 levels of effectiveness;

Source: COVID-19 Briefing materials: Global health and crisis response, McKinsey, 2020

Two scenarios are subsequently explored.

In scenario A3, where containment of the virus is assumed, the virus continues to spread in the Middle East, Europe and the United States until mid Q2, when the seasonality of the virus combined with an effective public health response significantly reduces the amount of coronavirus cases. In this scenario, the monetary and fiscal policies of Europe and the US would mitigate some of the economic damage, helping to recover by the end of Q2 2020, following the successful containment of the virus.

In scenario A1, where the global economic recovery is assumed to be muted, the virus spreads globally without seasonal decline, overloading the health systems of many countries, especially the poorest, with a large-scale human and economic impact. In this case, the US and Europe are expected to face an estimated decline in GDP of between 35% and 40% at an annualised rate in Q2. Economic policy would fail to prevent rising unemployment and company closures, with a consequent slower recovery even after the virus has been contained.

We at Twissen have observed that, although the travel industry is strongly affected by the current emergency situation, professionals can limit the negative fallout of the pandemic by focusing on proximity targets and communicating effectively with their customers, suppliers and employees on the security measures taken to increase perceived safety, a factor that will be increasingly critical in the travel and tourism industry.