An economic forecast is a prediction of national output. It is one of the main objectives of government and private economists. It is also the subject of intense and sometimes controversial debate. The concept of output is most often referred to as Gross Domestic Product (GDP). It measures the monetary value of the finished production within a country’s borders, including the revaluation of imported goods and services. A closely related concept is Gross National Product (GNP).
The most important thing to remember about economic forecasts is that they are subject to extreme error, and that it is particularly difficult to spot the onset of a recession. McCracken pointed out that it is not unusual for researchers to find that “a lot of the decline in their forecasts happens at the very beginning of a recession because the economy is behaving atypically at that point.”
As the economy slows, respondents become more likely to expect declining rather than improving conditions globally and at home. They are particularly hesitant to anticipate improvement in employment.
This year’s lower projections reflect a deteriorating global outlook prompted by rising trade barriers, elevated policy uncertainty and weaker-than-expected growth in major economies. Slower growth this year and next could lead to heightened social unrest, rising inflation and less progress in reducing poverty. Multilateral policy efforts are needed to foster a more predictable and transparent environment for investment.