Should we trust today’s forecasts from the IMF?
The half-yearly growth forecasts from the International Monetary Fund (IMF) are a big deal. They move markets, shape local politics and are generally relied upon around the world.
But how accurate are they?
Depending on your take, today's substantial revisions are either an indicator or rapid change and sharp volatility, or bring into question the validity of crunching numbers in the first place.
"Like most other official institutions, the IMF provides excellent economic analysis," Holger Schmieding, chief economist at Berenberg told City PM, "but somewhat less impressive forecasts".
Mapped: The IMF's latest predictions for global growth
Looking back at some of the IMF's old work shows that, while they are generally in the right ball park, they are subject to some hefty tinkering from time-to-time.
The table below shows how the IMF changed its outlook for 2015 growth in some of the major economies around the world from April 2014 to October 2015 – and how close it was to the actual number.
| 2015 growth predictions | April 2014 | October 2014 | April 2015 | October 2015 | Actual |
| Global | 3.9 | 3.8 | 3.5 | 3.1 | 3.1 |
| United States | 3.0 | 3.1 | 3.1 | 2.0 | 2.4 |
| Eurozone | 1.5 | 1.3 | 1.5 | 1.5 | 1.6 |
| Japan | 1.0 | 0.8 | 1.0 | 0.6 | 0.5 |
| UK | 2.5 | 2.7 | 2.7 | 2.5 | 2.2 |
| Canada | 2.4 | 2.4 | 2.2 | 1.0 | 1.2 |
For the Eurozone, the IMF was pretty reliable. The single currency bloc grew by 1.6 per cent in 2015 – in three of its four predictions the IMF guessed 1.5 per cent.
For the UK and the US, however, it was slightly further off the boil. In April 2015, the body was still suggesting the UK would expand by 2.7 per cent in 2015, now it reckons growth came in at just 2.2 per cent last year – nearly one-fifth below expectations.
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While the headlines this afternoon have been cuts to the forecasts, some countries escaped that fate. China, for instance, won a slight upgrade – perhaps an acknowledgment that the IMF went too far in its cuts back in January.
The revisions are generally sharpest for countries facing turmoil, which is much harder to predict. Russia is expected to contract by 1.8 per cent this year – but in January the IMF predicted just one per cent.
Jasper Lawler, market analyst at CMC Markets, said "it’s the fourth time the IMF has slashed its growth forecast in a year. The speed of the downgrades are troubling for the global economy and hardly a confidence-booster."