An economic forecast is a prediction of the future evolution of an economy. Its objective is to determine the factors that may influence a particular phenomenon, such as inflation or real GDP growth. The forecast is based on statistical methods. Some of the most commonly used methods include time series analysis, model-based forecasting, and non-linear models.
Economic forecasting has been a topic of interest for more than 150 years. The reason seems to be that it was around this time that governments began to see themselves as responsible, at least to some degree, for the economic prosperity of their populations. This view gave rise both to specific proposals for the control of economies and to methodologies for creating precisely specified forecasting “models” that could be used to choose between alternative policies at a given moment in time.
Global growth is expected to slow in 2024 and 2025, reflecting a withdrawal of fiscal support and elevated central bank rates to fight inflation. Downside risks to the outlook include a sharper-than-expected slowdown in advanced economies, heightened policy uncertainty, and further tensions on the trade front.
One of the most important tasks of an economist is to identify predictive series and to build models that can correctly predict their evolution over short- to medium-run horizons. Numerous studies have found that some financial and macroeconomic series, such as the yield curve, have considerable predictive power for output growth. However, the predictive power of some models deteriorates during recessions. A large literature has also identified that non-linear models provide better forecasts compared with frameworks that only take into account the average linear effect of one variable on another.
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