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‘Here comes a ‘K shaped Recovery’’

  • Category
    Economy
  • Published
    19th Jan, 2021

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About

  • What is K-shaped recovery?
  • The “K-shaped” economic recovery, is characterised by a stark split in the recovery pace of the economy— some sectors are bouncing back ahead of the rest at a much faster pace, while others are continuing a downward trajectory.
  • K-shaped recovery occurs if different sectors recover at different rates.

Typical economic recoveries

  • Typical economic recoveries can include Z, V, U, W and L:
    • V-shaped recovery:A sharp decline followed by a rapid recovery, with very little time spent at the trough, or low point, of the recession.
    • U-shaped recovery:A steep decline followed by a period of time in which the economy sits at the low point of the recession before finally recovering.
    • W-shaped recovery:Also known as a double-dip recession, this is a scenario when the economy experiences a steep decline, followed by a small and temporary recovery and then a second decline.
    • L-shaped recovery:A severe recession in which the economy declines and doesn't recover for years, if ever.

Consequences of a K-shaped recovery

  • The K-shaped recovery, presaged for the present recession, may lead to changes in the economic and social structures.
  • The affluent section of the market recovers at a rapid pace through solid capital allocation in assets priced at a bargain.
  • Regular citizens of the economy who feel the heat of the downturn, dip into long-term savings to tide over the short-term.
  • Daily wage earners and individuals who work in the gig industry, face the harsh reality of taking on debt to pay off on-going loans. This adds an additional debt burden which further worsens their situation in the long-term.
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