The IMF forecasts the US economy will rebound this year, Turkey's economy will contract, and Europe will reduce interest rates. The Organization for Economic Cooperation and Development agrees.
Should you follow the predictions of the two government-backed international organizations and bet on NASDAQ stocks and against the Turkish lira? Not according to a number of studies -- including two by the IMF itself. The studies found that the IMF's and OECD's ability to forecast is no better than an average of private economists' projections -- and may be worse.
The IMF's World Economic Outlook, published last week, makes headlines from Sao Paulo to Moscow, largely on the strength of the lender's access to data from finance ministers and central bankers worldwide. The OECD, which published its outlook yesterday, has the same channels of information.
Those official links don't mean the predictions are right, said one critic.
"These numbers get vested with all kinds of importance they don't deserve," said Roy Batchelor, a British researcher who studied the accuracy of IMF and OECD forecasts. "What's more important is the feel the IMF gives the numbers, and the nudges it gives policy-makers." The headlines make IMF miscalculations stand out.
Last September, the IMF said the US economy would expand 3.2 percent this year, prompting the fund's No. 2 official, Stanley Fischer, to say he ``feels much safer'' about the world economy.
Last week, the fund lowered its US prediction by more than half and put world growth at its lowest level since 1998.
In April 1997, the IMF called Thailand, South Korea and Indonesia "strong performers" that would drive developing countries' output to 6.5 percent that year. Three months later, Thailand devalued its currency, triggering a chain reaction throughout East Asia and eventually sending the region plunging into recession.
And while the IMF report last week predicted strong growth in Latin America, the fund itself questioned that optimism.
"Our forecast for South America is a little rich given the problems we've recently seen in Argentina and some of the spillover we've seen to Brazil," IMF Chief Economist Michael Mussa said after releasing the report he supervises.
And even as the IMF came out with a forecast of 4.2 percent for Africa this year, it acknowledged that on average during the past decade it has predicted growth in the poorest continent at one percentage point more than the actual result.
While critics point to the IMF's forecast in September that the US would grow 3.2 percent, the fund counters that it predicted for years that the economic boom in the US would end. And many private economists didn't see the slowdown coming either.
In a 1996 analysis of its forecasts, the IMF said it almost always predicted economic growth in the richest countries to within 1 percentage point each way -- with no evidence of bias for the forecasts.
SPEAKING OUT: After Siranudh Scott’s allegations surfaced, celebrities and public figures took to social media to share their own experiences of sexual misconduct and abuse A high-profile alleged sexual abuse case within a wealthy Thai beer brewing family has prompted a wave of painful accounts from survivors of unconnected abuse in the conservative nation. Siranudh Scott, a member of the billionaire Thai family that founded the ubiquitous Singha beer brand, posted an emotional video this month accusing his elder brother Sunit of repeatedly abusing him when he was a teenager. Sunit, who is in his 30s, later denied the allegations in a video posted online, but Singha parent Boonrawd dismissed him from his executive role with the company on Tuesday last week. “I felt I needed to speak
SEEKING ORDER: Rodrigo Paz said that ‘anyone who wants to destroy the nation will have to deal with this president and the full force of the constitution’ Bolivian President Rodrigo Paz on Wednesday said that the nation was at a “breaking point” after nearly a month of protests that have caused shortages of food, fuel and medicine. Paz, who took office six months ago amid the worst economic crisis there in four decades, is battling a groundswell of fury over his policies. The political capital, La Paz, has been besieged by low-income workers and members of the indigenous majority calling for his resignation. “The country needs order and is reaching breaking point,” the 58-year-old said at a public event in La Paz, renewing his appeal for dialogue. On Tuesday, the Bolivian
A Hong Kong astronaut is to join a Chinese space mission for the first time as part of a three-person crew launching today, as Beijing edges closer to its goal of landing people on the moon. The Tiangong space station — crewed by teams of three astronauts that are typically rotated every six months — is the crown jewel of China’s space program, boosted by billions in state investment in a bid to catch up with the US and Russia. The Shenzhou-23 mission is to blast off at 11:08pm from the Jiuquan Satellite Launch Center in northwestern China, carrying three astronauts to
UPGRADED ALERT: The risk inside DR Congo is now considered ‘very high,’ while neighboring countries face a ‘high’ threat as the outbreak continues, the WHO said Ebola is spreading faster than responders can track it in eastern Congo, where health workers managed to follow up with barely one in five identified contacts in a single day. Authorities in the Democratic Republic of the Congo (DR Congo) reported 83 confirmed infections, 746 suspected cases and 1,603 identified contacts as of Thursday, but health workers were able to follow up on only 342 contacts that day — about 21 percent of the total under monitoring — data released by the DR Congo Ministry of Public Health on Friday showed. The figures suggest the response is falling behind the outbreak itself,
RSS