Economic Expert Offers Mixed Outlook for Global Economies

Ethan Harris, head of the global economics team at Bank of America, shared an update on his outlook on the world economy during an online presentation to the students, staff and faculty at San Diego State University’s Fowler College of Business on April 14, 2021. The update was a follow-up to his presentation on the global economic outlook he first presented to the college on December 7, 2020. 

Ethan Harris head of the global economics research team at Bank of America.

Bruce Reinig, the Thomas and Evelyn Page interim dean of the Fowler College of Business served as the moderator for the lecture which was hosted by the Center for Advancing Global Business.

Harris’ presentation, titled “An Uneven Recovery” detailed how “the U.S. is sprinting ahead of the rest of the world” in terms of the economic recovery prompted by the worldwide COVID-19 pandemic. He said there are three reasons for this:

• The U.S. mounted a fast vaccine rollout and a fast reopening of businesses
• Dramatic fiscal stimulus on the federal level which stimulated economic growth
• The aggressive policies engineered by the Federal Reserve designed to keep interest rates low, stimulate job growth and target a 2.5% inflation rate

He also said while the U.S. is far ahead of the vaccination rate predicted at the start of the year, the rate of COVID-19 cases has also picked up though he doesn’t “expect this to become a serious escalation.” 

“The Economy’s Booming Right Now”

Harris continued that the outlook for the rest of the world is far less optimistic with the major outbreak of the virus in India and the slower vaccine rollout in most of Europe. He also noted that the U.S. has outpaced other world economies in terms of fiscal stimulus, which has set up the nation for “the fastest recovery in history — the economy’s booming right now,” he said. “We’ve got almost a million jobs last month, GDP growth is running at 7% in the first quarter, and probably 10% or higher in the current quarter. This is very strong growth. We’re ending up at a higher point then you would have had if nothing had happened and that’s a very unusual story to tell, because normally recessions don’t give you this kind of recovery too quickly.” 

Harris used this line graph to illustrate the recent number of COVID-19 cases in the U.S., U.K. and the European Union

Twice as Bad, Half as Fast

However, Harris pointed out that the economic situations in other nations lag behind the U.S., noting that nations using the Euro had a recession “twice as bad as the U.S. and their recovery is about half as fast.” Conversely, he also believes that since Canada and Australia “were among the big fiscal stimulus economies, we think that they’re going to recover back to their pre-crisis levels and go beyond it.” 

As for Asian countries, Harris noted that China, Korea, Taiwan and Singapore were able to contain the virus, have their population wear masks and quarantine in order to get the virus under control. “These are all high performing countries, relative to the rest of the world,” said Harris. “Then, as you move away from that group and away from the U.S. with its supercharged fiscal policy, things are a lot weaker.” He pointed out how India, Mexico and Brazil have all struggled due to their weak fiscal management and inability to get vaccines while their economies have paid the price. 

Eventually, Harris believes that the global economy will get back on track with the U.S. leading the way, followed by Europe and Japan, though he does see trouble for some developing nations in that “countries that lag the most and don’t really reopen are the poorest parts of the world, so there’s a kind of social injustice” for these nations.