The Return of the V Shaped Recovery

of life returning to normal. But a lot of golf courses aren't coming back from the pandemic, and it's all down to the booming online shopping. Stay tuned to hear more that and to learn how the UK is managing after a hundred days of being properly out of the European Union. First the return of the v shaped recovery. In the past few weeks, we've had an outpouring of optimism about the economic recovery, especially in the US. They

are annual meetings. This week, the International Monetary Fund added its voice to the chorus with the prediction that developed economies could not only enjoy two years of rapid growth in one and twenty two, but see little or no permanent hit from the downturn of the IMF does see inequality increasing due to the pandemic, with ninety five million more people having been pushed into extreme poverty, and bumpier

recoveries in prospect for many emerging market economies. All in all, it seems a good opportunity to check in with our chief economist, Tom Marlick in d C. Tom, you have your own forecast out, just give us, give us some of the highlight. So, first of all, Stephanie here at Bloomberg Economics, we were a little bit disappointed by the I m F rushing out their world economic outlook just

a few minutes after we published our global forecast. Seemed like it rather crass attempts to steal the limelight from us. But turning to turning to the substance um, the I m F up their forecast from five five to six percent. That's an optimistic forecast. We're even more optimistic at Bloomberg Economics. We're penciling in six point nine percent growth for the world economy this year. What are the big factors at work? Well,

there's two main forces. First, you've got a virus in retreat as vaccines roll out across advanced and some emerging market economies. Secondly, you've got that huge US stimulus one point nine trillion dollars, perhaps more to come if Biden gets his infrastructure deal through. That pushes growth in the US up to its highest level all since the early nine eighties and sends ripples around the world as trade

partners benefit from stronger US in boards. And we did think, I remember when we were talking about this last year, we thought that the emerging market economies would do a lot worse than the developed economies economically, and that everywhere we would see significant permanent scars from this crisis. Are we revisiting either of those of you? So? I think on the emerging market side, there's two big points to make.

The first is a point about China. China really dominates the emerging market space if you think about the size of its economy. It was remarkably successful in controlling its domestic outbreak, is having a v shaped recovery, and that significantly shapes the sort of the overall emerging market picture. Second point to make about emerging markets is once you get past China. You really have to draw a distinction

between the exporters and the borrowers. The exporters countries like Vietnam, for example, they're going to have a stronger year as they benefit from resurgent global demand. The borrowers, places like Turkey, places like Argentina are already suffering as US yields borrowing costs start to rise. Thinking about the sort of the largest scarring story, UM, I think the sort of the unique character of the crisis was really that it was a kind of a pure exogenous shock. It was like

the world was hit by an asteroid. There really wasn't a sort of a fundamental problem of fundamental imbalance with the world economy which caused the recession. It was just the virus. And so the hope was always that if we can get enough stimulus into the economy to keep businesses solvent, to keep households afloat until a vaccine is found, then we can have a pretty rapid recovery. And so now countries like the US and the UK where the vaccines are rolling out fast, that's what we're starting to

see happen. I noticed that the IMF part of their reasoning was that the area, the parts of the economy that have been worst hit, what they would cause sort of contact intensive so places, hospitality, things where people are are in contact with each other. That that that the damage done to those sectors was more likely to be temporary and would not necessarily feed through to the broader economy.

And the way that you've seen, for example, the damage and the financial sector and the global financial crisis affect everything. Do you think do you think there's some truth in that or are they are they underestimating some of the

possible long term effects. That's a good question. I mean, I guess if you think about the global economy, you can think about sort of critical nodes in the global supply chain and other parts of the economy which are important but don't have so many inter connections, don't touch so many other points. So at one extreme, if you blew up Taiwan semiconductor industry, that would really send some really serious ripples around the world. Right, we couldn't make smartphones,

we couldn't make cars, we couldn't make laptops. The world economy would in significant respect grind to a halt um. If you blew up your local Kentucky Fried Chicken or your local cinema chain. That would be really bad news for the for the people who worked there, bad news for the local residents who enjoyed that service. But the

global ripple effects wouldn't be so severe. So perhaps a virus that has devastating impacts on those sort of high contact service industries that leaves the kind of the sort of the hard infrastructure of the industrial sector largely untouched, maybe it doesn't leave such long term, such deep scars. We were talking to Heavier Blast last week about the

vulnerable points in the U s A on. I mean, I feel like we're developing a bit of a sideline and sort of how to guide for for would be global terrorists who want to bring down the global economy, just pointing up the key places they ought to try and hit um. I did see that the head of JP Morgan Jamie Diamond, in his letter for this year, had been extremely optimistic about the US recovery and thought that the boom could continue for for several years. Are

we seeing risks there? I mean, there is now so much optimism about the pace of US growth and so much government money pouring into the economy. So I think if we go back a couple of months to the end of twenty UM, there were a couple of big negative factors which people were concerned about for the US in addition to the virus UM, so we had a

really fragile political situation. It looked like there might not be sort of a clear control of the White House and Congress by a single party, and that could stem the attempts at fiscal stimulus. And we had the looming threat of US China decoupling and all that could mean for exports UM and for global supply chains UM. From where we're sitting at the end of the first quarter of one, both of those problems looked to have been

resolved or looked to be moving in a positive direction. UM. The Democrats have got control of the White House and control of Congress and they're using that to push through very significant fiscal stimulus and talking about a big infrastructure bill.

And US China tensions they're they're they're escalating, But early indications seemed to be that they could provide a motive for the US to kind of invest in its future, invest in infrastructure, invest in education in a way which if done right and if done on on the right scale, could start edging potential growth higher. And so certainly things are looking a lot better now than they were three months ago. But let's remember also how sort of tenuous,

how fragile the politics which has underpinned this shift. Is that fifty fifty split in the Senate, which is really the kind of the fulcrum on which all of this is turning, could really move in either direction in the

years ahead. Well, we're going to hear about the impact of Brexit in the UK in a minute, but it does make me wonder, I mean, when you that the mute music coming out of Europe and the UK at the moment is much darker than this feeling that they have really messed up the vaccine rollout in the case of the europe renewed lockdowns, causing some to to revisit

their forecast for the European economy. Is that I mean, is this the story that we're telling, The sort of bright, bright v shaped story we're telling is that primarily the U, S and China we're talking about, with Europe in the UK potentially suffering more damage. So, um, the US and China, they're the biggest economies in the world. They're both going

to outperform this year. We're penciling in seven point seven percent growth for the United States on a four quarter four quarter basis, nine point three percent growth for China. With those two big economies doing so well, the world picture looks pretty positive. Europe, as you as you know, is some way behind that. We see four point four percent growth for the Eurozone this year and the recovery starting later because they haven't done so well at rolling

out their vaccination program. Still, if you can kind of step outside the kind of the intensity of the momentum and think about the sort of slightly bigger picture for Europe, Yes, their recovery is going to be a bit slower, Yes it's going to be a bit later, but we still see Europe coming back very strongly from later in the second quarter and heading into the second half of the year. Tom Marlick, thank you very much. Thanks Stephanie. Now I

mentioned Brexit. Last time we heard from Bloomberg economic reporter Lizzie Burden, she was talking to lorry drivers queuing at the port of Dover, wondering whether they would get home for Christmas. Since then, Britain has probably left the European Union and early heavily distorted numbers suggests that trade between the UK and the EU has fallen dramatically. If you make your living exporting shellfish, for example, you're hurting. That sector's exports to the EU fell by nearly in January.

But what about everyone else? Are all those gloomy forecasts of what Brexit would do to the British economy finally coming true? We asked Lizzie to give us an update. Almost a hundred days since the chimes of Big Ben marked that Brexit was formally completed. The UK government has seemingly banned the B word, while coronavirus has overshadowed reports of trade disruption. Still, like any divorce, UK EU relations have been messy since January one. Some sectors have been

hit particularly hard. I asked James Withers, chief executive of Scotland Food and Drink, why it's been so tough for his industry. So for a lot of this a hundred days of paid. They have gone from a position where it was as easy to sell their cheap drink products to Manchester and England as it was to say, into Madrid. And what's happened just trying to get it into the EU. Then a wave of new paper work, complexity, a lot of cost into that, and we've seen systems breakdowns or

even partly product aisee league. But when they don't go partially, the product doesn't move at all. David Hennig, director of the UK Trade Policy Project at the European Center for International Political Economy, says British firms are disadvantaged because import checks have been postponed for goods entering the UK unlike those sent to the EU. It's really unbalanced. So explots us to to Europe are perhaps wondering why they're the only people who are having to go from the full

set of new checks and nobody else does. When you can, you can understand that that frustration, and I'm hearing it pretty much up and down the country. Northern Ireland has been especially affected because of the Northern Ireland Protocol, which effectively draws a trade boarder down the Irish Sea. Ashley Piggott is managing director of craig Oven based a j Power, a manufacturing company that's been crippled by additional post Brexit

surcharges to bring components into Northern Ireland from Britain. In January there was one hundred and eighteen thousand, three hundred consignments into all Ireland, which is a very low number. You know, your expectation would be more into the half million plus. And all those consignments have to go through eventually a process with transportation and typically that adds somewhere in the region off between twenty and thirty point surcharge

per consignment, irrespective of the value. It's a different story south of the Irish border. County Dublin based Hollyer Hannon Transport, which specializes in moving mixed loads of fresh produce, says it's never been busier as Irish importers and wholesalers are switching from GB to EU based suppliers. I spoke to

Donald McCann, the company's managing director. Certainly in the first couple of months um that was a very very big reduction in the volumes and the that was certainly head off in a way that the volumes were in Christo our other which was from the entire island of Ireland to mainland EU. We were fortunate and that the NI protocol hasn't greatly affected us. I mean not in terms of whilst we have obviously customers and Northern DAN customers,

and we have Britain. We've been goods back and forward between TV and n I that it would make up a reasonably small fraction of the overall volumes that we transport. Some businesses in Britain's more distant EU neighbors are suffering too, and A Stalinger, deputy director of the Confederation of Swedish Enterprise, says a fifth of Swedish companies have had problems trading with the UK since January. More companies say that they will start finding other suppliers than the supplies from the UK.

What we can see now is that with the higher cost, the higher it shapes, and the intitulation, the liberty and the problems in the logistics, Swedish companies are actually looking at other countries to source from. So there is less of optimism when it comes to imports from the UK

to Sweden beyond individual companies experiences. The first official UK trade data since Brexit for the month of January reskewed by the impact of COVID nineteen stop piling ahead of the end of the transition period and a hangover effect from the pre Christmas chaos at the port of Dover when France shut its borders. So I asked David Hennig what lies ahead. There's still a lot to happen in the UK trade story. This is just the beginning hundred days.

I mean, there is a reason why I can again back assessments for trade deals and normally take place over ten years. There's a huge amount of adjustment still to happen in the UK you trade. It seems clear that what the UK government has described as teething problems could be here to stay. M Now, finally, I promised I was going to explain why golf courses were turning out to be one of the less obvious casualties of COVID ninety. Our real estate reporter Alex Wittenberg in New York is

going to explain everything. Alex, um, what why is it that the golf courses are disappearing at an increased rate thanks to the pandemic. Yeah, so they're about There are kind of two trends that are converging that make up this trend we're seeing, and the first one has to do with the decline in the rate of people playing golf.

So in the late nineties and early two thousand's a lot of golf courses started to be built, and that had to do with Tiger Woods coming on the scene and becoming a sensation, and by most accounts today they over built. So since around the mid odds there have been more golf courses closed than opened and um since around two thousand and six, two thousand four courses have closed.

So during the pandemic, we've seen a slight uptick in the number of players playing golf, So there's around of four increase in the number of rounds played and that was the first time there was an increase in a while. But still because of the you know, flood into the e commerce space during the pandemic, so many people wanting to shop online, not go out into physical stories and

not being able to. Developers have seen the kind of decline of golf as an opportunity to get into a sector that is um really booming because of the pandemic and should we be And I bet some of the people living near these golf courses complained when the golf course arrived, and then they had no idea they could be much worse. They could be just a gigantic cupboard for Amazon. Is that what we're talking about, just big

wares is sitting on top of what we're greens. Yeah, that's right, and it could be a real challenge when the proposed development is close to where people live, because people don't want big trucks driving through their streets throughout the night, and that's often where they are. Yeah, because usually golf courses are worth more when they're closer to where people live, when they're in more affluent areas. In fact, a golf course can actually bring up the price of

a home if there's a home nearby a course. So there are a number of challenges to conversion. But this is those big warehouses as usually what we're talking about. So all those people who complain should now rush to sign up to their local club to make sure it stays there. In general, we've tended to think commercial real estate is not done very well out of COVID nineteen. Is this just one of the exceptions, Yeah, exactly. The

industrial space is an exception. Um. It actually had its strongest year on record in and for the first time ever at least since the you know, at least at the end of investors had poured more money into the ind real space then into the office space for the first time, um, since we've been tracking it. So this was an exception and a lot of that was driven

by the e commerce boom. And so that is just like I mean, we know that people have assuming or thinking now that a few people are going to be working in offices, or they're going to work less time in offices, um, but we surely are spending a lot more online. You mentioned that there had been a massive overbuild, and of course that's what happens in real estate all the time. There's a long lead times and then you

end up having overdone it. I mean, this is it's quite hard to reverse once you've dug up a golf course. Do you think this is going to turn out to be overkilled as well? Yeah, it might be. I think there's already some expectations that the rate of growth that we saw in is going to decline in this year when people are starting to go back to shopping in person.

It's it's hard to say. I was on a call with analysts from CBR not long ago and they seemed very bullish about the growth of the market and beyond. So I think some a place like a golf or is it really depends as well on whether players are going to stay. There are new players who, because they're confined to their homes during the pandemic, didn't want or didn't see many other options for being active and taking

up a sport. So if that trend does stay, then maybe this is kind of an unwise investment at this point. But I think most people are expecting that once other activities become available, that the old trends are going to come back, and that golf courses are not going to be um as in demand as they once were. So well, so that's again there's one piece of the market, many pieces of the market where people are feeling bullish. Alex Whittenberg, thank you very much. Thank you. So that's it for

this episode of Stephanomics. I'll be back next week with a special conversation with the economist and sometime revolutionary Marianna Matsukata. For more news and analysis from Bloomberg Economics during the week, you can follow as Economics on Twitter, or you can also find me on at my Stephanomics. This episode was produced by Magnus Hendrickson, with special thanks to Tom Warlick,

Lizzie Burden, and Alex Wittenberg. Lucy Meekin is the executive producer of Stephanomics, and the head of Bloomberg Podcast is Francesco Leafy.