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What is the type K recovery of the coronavirus crisis?

When the pandemic ends, there will be winners and losers in economic terms. Let's see what this situation would imply .

Person watching Netflix on his television

In the aftermath of the pandemic, some economic sectors are forecast to report higher profits while recovery will be more difficult for others. / Photo: Unsplash

LatinAmerican Post | Ariel Cipolla

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Leer en español: La recuperación K de la crisis económica del coronavirus: qué es y qué implicaría

The global economic crisis has a culprit: the coronavirus. From CNN they reported that, at the beginning of the pandemic, the IMF indicated that the "worst economic recession in 90 years" would be experienced. In other words, many economies were ruined due to the restrictions implied by the virus ... although at some point the recovery will occur.

Given the possible arrival of the vaccine, which would imply that, over time, the pandemic ends, it is necessary to begin to evaluate how the world economy will rise. The problem is that, according to El Economista, the economic recovery could have a “dangerous K shape” that would imply great inequalities. Let's see all the details.

K-shaped economic recovery

The economic recovery could imply a breakdown between various sectors. From El Blog del Salmón they emphasize that there is the possibility that there are "big winners and losers." This differs with some possibilities that involved other types of recoveries. Among them: a fast, V-shaped; a slow, U-shaped; a recovery followed by another crisis and a W-shaped recovery; a slight K-shaped recovery and even no recovery.

Well, as we have mentioned, there are indications that would mean that the post-coronavirus economic recovery would have a K shape. This is a debate that has been taking place in recent times since economists are always theorizing about the nature of economic recovery. 

According to the specialized medium Dinero, the letter K symbolizes a "rapid fall with a subsequent sharp division between winners and losers." Although we tend to think that the economic crisis only brings economic imbalances, it is clear that there are some companies that were able to take advantage of this context.

In this sense, the BBC believes that this type of economic recovery is "bad news for many". Basically, some sectors will have a vigorous recovery, while others will remain in free fall. This gap could be seen, for example, in those sectors that were able to maintain activities from home, while others simply saw the chances of resuming the course of the economy impossible.

Also read: Remote work: One of the keys to improving performance

In Economipedia they develop this concept by saying that the division in the economy will be stronger than ever, especially with workplaces that allow teleworking. For example, technology and software companies, telecommunications companies, or entertainment giants have not seen their income diminished, quite the opposite.

With more and more people at home and with more free time, it is common for people to subscribe to streaming services. For example, the AA website  indicated that, at the beginning of the pandemic, the company tripled its income by having about 16 new million subscribers to the platform.

In Engadget they also indicate that the crisis is divided into two sectors: the essential and those who can develop their work from home are on the one hand, while, on the other, there are those who cannot. For example, tourism, hospitality companies and even the film industry had to readjust or close their doors during this period, assuming losses for the sector.

Another of the industries that is showing a strong rise is pharmaceuticals. So much so that Medical Writing reported that they are offered as a "recovery engine" after the coronavirus, because, given the increase and the need for medicines, with strong financial injections in the research areas, it is one of the key sectors of the current economy.

In other words, there will be activities that will take much longer to reach the levels of activity prior to the health alarm. This could even take years, according to Voz Populi. In this way, this K-shaped recovery will imply showing many more inequalities in the different sectors that keep the economy going.

Also read: Latin American fiscal stimuli: necessary in times of pandemic?