Yep, it feels like the end of the world. But this is the time for business leaders to make educated decisions about the direction their companies are going to take during the COVID-19 downfall – and hopefully come out on top when we come out the other end of this thing. To help do this, we have developed scenarios to outline the direction and duration this crisis and its recovery can unfold.
Scenarios are a common and powerful tool to navigate extreme cases of uncertainty. It does so by developing a finite number of potential outcomes, in each explaining the underlying factors that would lead to the different potential futures.
Below we’ve outlined three possible scenarios of how the world is likely to change over the next year. Each scenario explains the main assumptions regarding the progression of infection and the continued travel restrictions (domestic and international) and economic implications.
The three outlined scenarios are intentionally written in the macro level and is the basis for specific industry and sector analysis. We are currently building industry playbooks for each scenario, so please contact us to find how these will affect your business.
Realistic
The US experiences a peak in cases in May. Number of new cases begins to drop by late May and halts by mid-June. Countries maintain different levels of travel and gathering restrictions to avoid resurgence. Led by the airline industry and low consumer spending, level of bankruptcies soars, and unemployment rises. Financial institutions are under pressure. Genuine recovery is only visible in Q1 2021. US annual GDP for 2020 contracts by 3.5% and 2.5% in Europe.
Optimistic
By mid-April, US and European governments efforts to slow down new cases bear fruit. Global scientific cooperation is able to produce effective treatment options, reducing significantly the duration and severity of the disease. By the end of April western governments ease local quarantine measures. International travel is still limited through Q2, yet domestic and some international routes reopen. Q2 consumer spending significantly drops resulting in an annual 1.5% contraction of GDP in the US and 2% in Europe. Yet, decisive government monetary policies are effective in easing financial hardship, leading to a full recovery by Q4.
Pessimistic
Similar to the Realistic scenario, in this case the US experiences a peak in cases in May. Longtail of cases creates a resurgence of outbreaks throughout the world, forcing governments to place areas under quarantine and maintain travel restrictions through most of 2020. Led by the airline industry and low consumer spending, level of bankruptcies soars, and unemployment rises. All of this feeds through a self-reinforcing downward spiral. 2020 GDP contracts significantly in most major economies continuing into Q1 2021.
