Ballpark economics

By The Economist online

How accurate are the IMF's forecasts?

ON JULY 16th the IMF released its new forecasts for the world economy. It currently expects global growth of 3.5% in 2012 and 3.9% in 2013. How accurate are these forecasts and how much attention should we pay to them? The Economist has dug out historical IMF forecasts made as far back as April 1999 and compared them to the actual figures. On average, over the 12 years for which data exist, the IMF underestimated growth by 0.3 percentage points in the immediate forecast year, but overestimated growth in the following forecast year by 0.2 percentage points (the average absolute error is much larger at 0.6 and 1.4 percentage points respectively). The Fund does gauge general sentiment well; it correctly anticipated the change in pace of GDP growth (ie, whether GDP was increasing at a slower or faster rate) for 18 of the 24 forecasts (between 1999 and 2011). What does this tell us about the forthcoming years? In their latest forecasts, the IMF emphasises that much depends on outcomes in America and Europe. So barring a big shock to the world economy (a Greek exit from the euro area for example), expect the Fund's forecasts today to stand up fairly well.