Global Macro Policy Quarterly: The Relay Recovery Enters The Next Stage

Economics vs. Health trade-offs still dominate with big divergences

Historically unprecedented times. We are through another quarter battling Covid-19 with optimism around vaccine releases tempered by high global case incidences led by India, Brazil, and the US. The latest WHO statistics (as of Sept 22) indicate almost a million deaths and 31.2+ million cases. Still, while the pandemic is not behind us, further full lockdowns should be avoided given adverse economic, psychological and social effects.

Advanced countries have managed the pandemic’s effects fairly successfully through job protection programs, accelerated vaccine development, lockdowns of different kinds and monetary and fiscal stimulus. Emerging countries have high-density mega-cities, limited
public health resources, crowded housing and joint family structures. Their policy response has been varied; the crisis has hit the informal sector hard, especially services and small/medium scale manufacturing. By and large, countries have responded individually to the crisis; limited global coordination contrasts the 2008 GFC experience.

Following big downgrades in March and June, this round we’ve made relatively small forecast changes. At the global level, a slightly worse outcome for developed economies is partly offset by an upgrade in China such that the estimated contraction in global GDP is only a tenth worse than we anticipated back in June. 2021 is then expected to bring a slightly stronger rebound that pushes global growth to its best since 2010.

One may argue that this is a V-shaped recovery. But we dislike letter labels since, as far as the recovery shape goes, what you’ll see will really depend on where you look. Sectors such as housing or manufacturing should do much better and make a fuller/speedier recovery than travel services, for instance. The magnitude of the initial contraction and subsequent rebound will also vary considerably across countries.

It is far better, in our estimate, to focus on the nature of this shock and the subsequent recovery. Along these lines, we’ve embraced the “relay recovery” concept. The successful race toward a full recovery depends on a succession of well executed baton handovers.

The Big Picture (page 2)
Global Macro Highlights (page 3)
Politics and Geopolitics (page 5)
Demographics and Retirement (page 7)
Country Macro Highlights (page 9)
Data Calendars (page 17)
Economic Indicators (page 19).