The U.S. economy could experience a double-digit percentage contraction in 2020 due to the coronavirus pandemic, Mohamed El-Erian told CNBC on Monday, suggesting a much steeper decline than most economists.
“I think we may be at minus 10% to minus 14% growth for the U.S.,” the Allianz chief economic advisor said on “Squawk Box.” “This is a big hit.”
El-Erian said the distinct nature of this economic downturn — stemming from a health crisis — means traditional frameworks may not be applicable, acting as a further obstacle for a rebound. “The benefits you would expect normally, lower oil price means more dollars in consumers’ pockets, even that doesn’t work in this economy. So I’m a little bit more worried than what the consensus of economists out there is right now.”
The comments from El-Erian, formerly CEO of investment powerhouse Pimco, were in response to data from CNBC’s Rapid Update survey, which includes various gross domestic product forecasts from across Wall Street. The average of the estimate late last week showed about a 4% decline in U.S. GDP this year, according to CNBC’s Steve Liesman.
The International Monetary Fund said last week that the U.S. economy could shrink 5.9% in 2020. The IMF said the world will “very likely” experience its worst economic hit since the Great Depression.
In a follow-up call with CNBC, El-Erian stressed there’s “tremendous uncertainty” around any economic forecast, including his own, saying, “I hope I’m wrong.”
However, El-Erian said he believes the process of resuming economic activity after a pandemic will be a challenging one. “Until people are both able and willing to go back to normal economic activity, the best you can do is relief.”