Chain · 6 cards
Do forecasters see a downturn coming?
Growth forecasts come out every year. How often did they show a downturn in advance — and what happens to the estimate once it has happened?
The cards, in order
- The IMF foresaw 28 of 537 economic downturns around the world a year ahead
Is it just the IMF?
- US: in 45 years forecasters expected the economy to shrink the next year only once
Maybe they saw the risk but kept it out of the forecast?
- Before 7 of 8 US recessions, next-quarter GDP decline odds were below 25%
And Europe in 2009?
- EU: in 2009 the economy shrank in 25 countries. A year earlier the European Commission expected it in 5
Is a downturn at least clear right after it happens?
- US: the first estimate had GDP falling at a 3.8% annual rate in late 2008. Today’s data: 8.5%
Do forecasts also err on the gloomy side?
- Iran: in April 2020 the IMF expected the economy to shrink 6.0%. The outcome: +4.4%
Downturns are seen late, but errors run both ways
The IMF foresaw 28 of 537 downturns a year ahead; US forecasters expected one only once in 45 years, when the recession was already under way. Even late-2008 US GDP was first estimated to fall at 3.8%, and by today’s data at 8.5%. But it goes the other way too: for 2010 the European Commission expected a downturn in 11 countries whose economies grew, and in 2020 the IMF expected Iran to shrink 6.0%; it grew.