Honda joined forces with the Red Bull team in 2019 after spending the 2018 campaign with its junior outfit Toro Rosso.
It was a largely successful year for the Japanese manufacturer, as Red Bull claimed three races wins as well as a handful of podiums, while Toro Rosso finished inside the top three twice.
Honda's first years as an engine supplier in the turbo-hybrid era were not strong, as it struggled to get up to speed with McLaren.
However, its development over the last couple of years is evident, with Cowell believing Honda's improvements have been stronger than Ferrari's.
"Honda are the best improvers this year, they're way ahead of Ferrari in terms of development rate," Cowell said on the Motorsport Magazine podcast.
"Red Bull can make championship-winning cars, Max Verstappen is formidable and Honda, their investment in what they're doing is huge and their determination is huge.
"And that's showing on track, and you can see that the structure and sound decision-making being done. It's going to be exciting."
Ferrari's engine was considered by many to be the strongest in the field in 2019, due to its consistent strengths in a straight-line across the season.
In 2021, the engine regulations will remain the same amid drastic changes to the rest of the car, which is aimed at providing a more competitive field.
Despite admitting that he would like a challenge of a new set of regulations, Cowell believes F1 is heading in the right direction with its engine.
"As an engineer that likes to be creative, likes new challenges, likes to be in the mire of a new challenge, fighting his way out, then yes, I wish there was more change," he said .
"But I think Formula 1 is moving in the absolutely right direction, and I think the V6 and ERS power unit that we introduced in '14 is now absolutely the right power unit.
"And I think it's good that the four manufacturers just iterate more and more. Let's have a close battle with the same set of regulations, I'm up for that.
"Then let's come up with a new set of regulations for maybe 2026 which is perhaps a bit more of a step away from what we've got now."
Bahrain International Circuit - Winter testing