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.
RALLYING CRY: Former US president Donald Trump has raised suspicions about why Chinese migrants are going to the US and advocacy groups worry about his rhetoric The US Department of Homeland Security on Tuesday said that it sent 116 Chinese migrants from the US back home in the first “large charter flight” in five years. The flight, which happened over the weekend, comes as Chinese immigration has become the subject of intense political debate in the upcoming US presidential election. “We will continue to enforce our immigration laws and remove individuals without a legal basis to remain in the United States,” US Secretary of Homeland Security Alejandro Mayorkas said in a statement. The department said it was working with China to “reduce and deter irregular migration and to disrupt
SOUTH CHINA SEA DISPUTE: The Philippines prefers to handle operations on its own, and would exhaust all possible options before asking for help, the military chief said The Philippines has turned down offers from the US to assist operations in the South China Sea, after a flare-up with China over missions to resupply Filipino troops on a contested shoal, its military chief said. Tensions in the disputed waterway have boiled over into violence in the past year, with a Filipino sailor losing a finger in the latest June 17 clash that Manila described as “intentional high-speed ramming” by the Chinese coast guard. The US, a treaty ally, has offered support, but Manila prefers to handle operations on its own, Armed Forces of the Philippines Chief General Romeo Brawner told
ELECTION JITTERS: After a call with the party’s leadership, a DNC member said they were being asked to ignore the party’s dire predicament after last week’s debate US President Joe Biden on Saturday attended a triple-header of campaign fundraisers, seeking to reassure high-dollar donors he can still win re-election in November despite a debate performance that sparked panic among many Democrats. Accompanying him at the fundraisers in New York and New Jersey was first lady Jill Biden, who has fiercely defended her 81-year-old husband amid calls for him to step aside. “Joe isn’t just the right person for the job — he’s the only person for the job,” she told one gathering, which featured actors Sarah Jessica Parker and Matthew Broderick among the cohosts. The president is facing a wave
NO CASUALTIES REPORTED: The Islamic Jihad claimed responsibility for targeting Israeli communities near the Gaza border with what Israel said was about 20 projectiles Israeli forces yesterday carried out deadly strikes on southern Gaza and battled militants after the army again ordered Palestinians to leave areas near the besieged territory’s border with Israel and Egypt. Witnesses reported intense bombing and shelling around Khan Yunis, southern Gaza’s main city from which Israeli forces withdrew in early April after a devastating months-long battle. A hospital source in the city said shelling killed eight people and wounded more than 30 others. The bombardment came after a rocket barrage on Monday targeting southern Israel claimed by the militant group Islamic Jihad, which has fought alongside Hamas. The rockets