Catalyst News

Economist Bernard Baumohl Opens Economic Forum, Says a ‘Financial Vaccine’ is Needed

by Catalyst Corporate | Oct 06, 2020

Economic forecasting is tricky business. So said Bernard Baumohl as he opened Catalyst Corporate’s annual Economic & Payments Forum on Monday. “The forecast is changing every few days,” said Baumohl, chief global economist at The Economic Outlook Group, “and the virus is still calling the shots.”

As an award-winning economics reporter, Baumohl is well known for being ahead of the curve when assessing the direction of the U.S. and world economies. The Wall Street Journal ranked him as the most accurate economic forecaster for 2018. But the unpredictability of the COVID-19 pandemic has the makings of a “category 5 political and economic hurricane.”  

“We cannot fix the economy until we fix the health situation,” Baumohl told the more than 425 who were tuned into Catalyst Corporate’s Economic & Payments Forum, held in a virtual environment because of the pandemic.

Baumohl’s quick-paced presentation was one of 10 stretching over two days covering timely topics ranging from economic outlooks, balance sheet management concerns and payment technology trends.

“We need to have a financial vaccine until we can get a COVID-19 vaccine,” Baumohl said.

Baumohl expressed optimism that there would be a relief package by the end of the year to battle the economic impact of the virus. The size of the relief package – if not adopted in the next few weeks – will then be determined by who wins the election. Baumohl predicts a larger package if Democrats make gains. Less so if Republicans hold onto the power reins in Washington.

Regardless of its ultimate size, Baumohl said three components are necessary for it to be effective. It must have:

  • Aid for city and state governments before many have to lay off essential workers because of balanced-budget constraints
  • Another installment of the Payment Protection Program (PPP) which will allow struggling businesses to hang onto employees until the economy improves
  • And support to help consumers with food and shelter.

It is imperative to maintain the financial health of consumers, Baumohl said, “because we are such a consumer-driven economy.”

With an economy edging toward contraction, Baumohl said there is a 50 percent chance of avoiding recession if a successful vaccine is deployed in early 2021 and a robust stimulus package is adopted. Without those countermeasures, a recession is far more likely, he said.

If recession can be avoided, there may be room for some economic growth in 2021. That growth, however, will depend on the outcome of the elections, Baumohl said.

If Democrats win, he said, expect 3.4 percent GDP growth in 2021.

If Team Trump wins, Baumohl projects 2.2 percent GDP growth in 2021.

If you missed Baumohl’s live comments on Monday and you would like to know more about the rationale fueling his projections, you can now listen to an on-demand version of his hour-long presentation.

Once the recordings have finished processing, on-demand versions of all Economic & Payments Forum presentations will become available on the Forum Hub.