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.
MONEY GRAB: People were rushing to collect bills scattered on the ground after the plane transporting money crashed, which an official said hindered rescue efforts A cargo plane carrying money on Friday crashed near Bolivia’s capital, damaging about a dozen vehicles on highway, scattering bills on the ground and leaving at least 15 people dead and others injured, an official said. Bolivian Minister of Defense Marcelo Salinas said the Hercules C-130 plane was transporting newly printed Bolivian currency when it “landed and veered off the runway” at an airport in El Alto, a city adjacent to La Paz, before ending up in a nearby field. Firefighters managed to put out the flames that engulfed the aircraft. Fire chief Pavel Tovar said at least 15 people died, but
LIKE FATHER, LIKE DAUGHTER: By showing Ju-ae’s ability to handle a weapon, the photos ‘suggest she is indeed receiving training as a successor,’ an academic said North Korea on Saturday released a rare image of leader Kim Jong-un’s teenage daughter firing a rifle at a shooting range, adding to speculation that she is being groomed as his successor. Kim’s daughter, Ju-ae, has long been seen as the next in line to rule the secretive, nuclear-armed state, and took part in a string of recent high-profile outings, including last week’s military parade marking the closing stages of North Korea’s key party congress. Pyongyang’s official Korean Central News Agency (KCNA) released a photo of Ju-ae shooting a rifle at an outdoor shooting range, peering through a rifle scope
India and Canada yesterday reached a string of agreements, including on critical mineral cooperation and a “landmark” uranium supply deal for nuclear power, the countries’ leaders said in New Delhi. The pacts, which also covered technology and promoting the use of renewable energy, were announced after Indian Prime Minister Narendra Modi and Canadian Prime Minister Mark Carney hailed a fresh start in the relationship between their nations. “Our ties have seen a new energy, mutual trust and positivity,” Modi said. Carney’s visit is a key step forward in ties that effectively collapsed in 2023 after Ottawa accused New Delhi
Gaza is rapidly running out of its limited fuel supply and stocks of food staples might become tight, officials said, after Israel blocked the entry of fuel and goods into the war-shattered territory, citing fighting with Iran. The Israeli military closed all Gaza border crossings on Saturday after announcing airstrikes on Iran carried out jointly with the US. Israeli authorities late on Monday night said that they would reopen the Kerem Shalom crossing from Israel to Gaza yesterday, for “gradual entry of humanitarian aid” into the strip, without saying how much. Israeli authorities previously said the crossings could not be operated safely during
RSS