Larry Summers points us to this remarkable statistic:
Forecasts of all sorts are especially bad at predicting downturns. Over the period [1999-2014], there were 220 instances in which an economy grew in one year before shrinking in the next. In its April forecasts the IMF never once foresaw the contraction looming in the next year. Even in October of the year in question, the IMF predicted that a recession had begun only half the time.
I guess no one likes to be the skunk at the party, even the IMF. But I wonder who did better at predicting recessions? Goldman Sachs? The CIA? A hedge fund rocket scientist in Connecticut? Whoever it is, it sounds like the IMF might want to look them up.
UPDATE: It gets better! Via Twitter, Mark Gimein points me to Prakash Loungani’s article 15 years ago about recession predictions during the 1990s:
How well did private forecasters do in predicting recessions in these cases? Quite simply, the record of failure to predict recessions is virtually unblemished. Only two of the 60 recessions that occurred around the world during the 1990s were predicted a year in advance.
….If private sector growth forecasts are of little use in spotting recessions, why not use the forecasts provided free by the official sector?…There is not much to choose between private sector and official sector forecasts. Statistical “races” between the two tend to end up in a photo-finish in most cases.
Loungani doesn’t provide a precise number for IMF predictions, but he implies it’s roughly the same as private-sector predictions: 2 out of 60. If that’s the case, the IMF has gotten even worse since then. A hit rate of 3.3 percent might be pretty lousy, but at least it’s better than 0 percent.
