Welcome to volume II. The one idea we keep thinking about: Fractured Growth. From 2008-2020 the global economy moved in synchronized swings. In 2017, measured by GDP, 80% of the world was accelerating. In 2019, we saw a mirror image. 80% of world was decelerating. But will it really work the same way in the wake of COVID-19?

China could see a “V” snap back, Europe a “Nike swoosh,” the US a double dip “W.” The path of the pandemic will drive the economics, and the economics will put new strains on our supply chains, our geopolitics, and our alliances. It will challenge long-held assumptions about inflation, trade, and globalization. To those who say China can’t bounce back while the US consumer is in the midst of a recession, we say, are you sure? Think about what we all knew was certain on January 1, 2020. There’s a path for China’s faster recovery through Europe and the rest of emerging Asia.

So, get ready for this new reality. Get ready for fractured growth, and the ripple effects on our already fractured politics. Don’t say we didn’t warn you…

Now, let’s look at the week ahead.

Top 3: What to Watch for in the Week Ahead

You know about the IMF meetings, corporate earnings season, and the historic week ahead for oil. Here’s what may be flying under your radar.

• Iran’s test case? President Rouhani is trying to slowly re-open the Iranian economy, starting today. The idea is to send workers back for “low-risk” jobs – although it’s unclear what qualifies and what doesn’t. In the holy city of Qom, the epicenter of Iran’s outbreak, about 25,000 businesses will spring back to life tomorrow. There’s intense division both within the government and from outside experts on whether the decision is premature. The economic concerns are beating out the health concerns, for the moment. Sound familiar? Believe it or not what happens in Iran may be a test case for Europe and the US. Strange times.
• China’s “official” Q1 GDP. We’ll get China’s first quarter GDP numbers on Thursday. Could China’s first quarter be a preview of the rest of the world’s second quarter? Analysts certainly feel that way. We’re skeptical. Remember, this is the official government line. The pressure to deliver a better than expected number is enormous, especially since the report comes the same day Yi Gang, the head of the People’s Bank of China, presents to other G20 central bank governors at the IMF meetings. Do we really believe China is going to come out with a shockingly bad number right before the head of its central bank speaks to the world? The street consensus is -10% for Q1. If it’s better than that, raise an eyebrow.
• India’s weak stimulus. Modi’s response to the crisis has been roundly criticized – including the ill-fated emergency lockdown which forced hundreds of thousands to crisscross the sub-continent by foot and further spread the disease. The government is expected to announce new measures to help small businesses tomorrow. But this would only bring the total for all Indian stimulus spending to 3.5% of GDP. Compare that to the rest of Asia, Europe, and the US – all spending closer to 10% of GDP to combat coronavirus. How long can India sustain this weak response? Expect Indian Finance Minister Sitharaman to hear it, virtually, from her colleagues during the IMF meetings. We’ll know if any of the cajoling worked in a week, the next time we expect to hear from Modi.

The Deep Dive 5: What GBE is Reading
Our Top 5 weekly selections to help you get up to speed on the long-term changes in the global economy.

• Olivier Blanchard & Jean Pisani-Ferry: Have Central Banks given up on taming inflation? Of course not. Stop panicking. Two brilliant economists explain why central banks are doing the right thing in a time of crisis. (VoxEU)
• Ragu Rajan: Saving Capitalism from Itself. We know the questions about capitalism are only going to accelerate post-crisis. This is the second great recession in essentially a decade. Time to get ahead of the curve. Or at least catch up to it. (Foreign Policy)
• The Climate Club: For the first time in a generation there’s clean air in Los Angeles. Will it change the way we fight climate change in a post COVID-19 world?(Foreign Affairs)
• Africa Needs Debt Relief, Today. We’ve promised to keep the spotlight on emerging markets and low-income countries. This is one place to start. The next wave of Coronavirus is coming to the countries who can least afford it. (Project Syndicate)
• The Fed Needs to Move Faster. It may seem unfair to criticize the Fed given that Jay Powell is a one-man committee to save the world. The Fed has done more in a short period than anyone imagined. But, as Hal Scott writes, no rest for the weary. (Wall Street Journal)

By the Numbers

• -8%:   Unemployment numbers? GDP losses? No. That’s the drop in electricity usage in the US for the week ending April 5^th.
• As the New York Times reports, it’s actually electricity usage which can give us the best snapshot of economic activity across the US. While unemployment data lags and is prone to error, electricity usage is available within 24 hours. It also shows us regional disparities in close to real-time. Eastern Michigan, for example, experienced a 12 percent drop this past Tuesday. Electricity is our best indicator to understand what’s happening in the US economy, and global economy, in the weeks ahead.

Sneak Peak: What’s Coming from GBE This Week

We know you’re busy – but here are 3 things not to miss in the week ahead:

Financial Disinformation: I’m writing an op-ed with Graham Brookie, head of Atlantic Council’s Digital Forensic Research Lab. We hope you read the whole thing when it’s published later this week but here’s the takeaway: Wall Street isn’t fully prepared to deal with a health pandemic. The information asymmetry combined with high-frequency trading makes disinformation a potent, and lucrative, weapon in the chaos. We break down key examples and show how the SEC can step-up its game and stop market manipulation in the weeks ahead.

The New Rules of Global Trade: Senior Fellow Barbara Matthews writes about how COVID-19 could change the global trading system. One big idea: sanitizing supply chains. How will countries know that their imports are Coronavirus free? We’re going to need new international standards and the work should have started yesterday. The full piece will be available later this week.

Inside the IMF: Two months ago, I was reviewing early drafts of the Spring 2020 world economic outlook, while I was still at the IMF. On Tuesday afternoon at 1pm, former IMF official Hung Tran, Dr. Alexis Crow, and myself will take you inside the IMF’s new forecast. It’s not about the topline numbers, it’s about interpreting the words they use to get a sense of how bad they think it’s going to get, and how, when, and where they think it’s going to get better. This is a private, off-the-record briefing available to our program supporters. If you’d like to attend please email Will Bonney, wbonney@imf.org.

The 1 Line to Keep in Mind

“We think it is going to be a virus that stalks the human race for quite a long time…”

– WHO Special Envoy David Nabarro, April 12th

Ask yourself, are policymakers and investors preparing themselves for this seismic change? It’s the nature of politics and markets to want to get past the crisis and back to normal. But if we’re realistic now we can better prepare for the global health and global economic recovery coming soon.

One example: Shouldn’t the next stimulus (still slated for end of April) have unemployment benefit extensions and small business loans that automatically kick-in if jobless rates stay in the double digits? We don’t know exactly what the next six months will look like but if we don’t try to look around the corner we’ll always be playing catch-up.

We’ll try to help you look around the corner in the days ahead here at the Atlantic Council.

Happy Easter, Happy Passover, and have a good, and healthy, week.

We hope you find this useful and welcome your feedback as we improve in the weeks ahead.

You can follow us on Twitter @ACGlobalEcon & @AtlanticCouncil. If you were forwarded this note and would like to join our list, please email Will Bonney, wbonney@atlanticcouncil.org.