Wednesday, March 18, 2009

Economic forecasts: a load of crystal balls

The IMF has made its seventh stab at forecasting GDP growth for 2009. Here is its record so far, showing how its predictions for the major economies this year have massively changed:

And here’s what I said in January, when their sixth effort was produced:

Can we have much confidence in the latest predictions?
Think about it this way: what are the next IMF forecasts, due in April, going to say? … If we can’t predict the next prediction confidently, then what’s the point in crunching numbers about the rest of the year, or even beyond?

Well, I was wrong: we didn’t have to wait until April for the next set of wildly different numbers. In just two months, the forecast for US growth this year has dropped by a full percentage point; ditto the UK. Canada is down 0.8, the Eurozone 1.2 and Japan all of 2.4 points. And these are just the latest in a rapid series of hefty revisions.

To repeat myself again:

There’s too much uncertainty, particularly about what’s going to happen with the various schemes around the world to support banks and lending. Until this is resolved, there just won’t be any reliable growth forecasts.

The IMF has also got new forecasts for 2010. If you think they’re worth looking at, you’re out of your mind.

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