‘It’s difficult to make predictions, especially about the future’. We are well aware that predicting economic cycles and currencies is fraught with uncertainty as what we are ultimately predicting is the behavior of billions of people. That said, over the long term markets and economies tend to follow semi-predictable paths and forecasts allow clients to avoid the most common indusrty pitfall: extrapolating trends.
Mainstream Forecasting Record Reflects Rear-View Mirror Approach
The charts above show the IMF’s estimates for Global real GDP growth. As with most forecasters, the IMF simply forecasts growth for any given year to be in line with the previous year’s figure. As a result, the IMF did not come close to forecasting the 1998 and 2001 downturns and were completely caught off guard by the 2008-9 recession and subsequent recovery.