Note: Errors are calculated as actual growth less projected growth at each forecast horizon, where actual growth is the published outturn as at May the following year. A negative (positive) error indicates over(under)-prediction.
• GDP growth was overestimated on average across 2007-12, reflecting not only errors at the height of the financial crisis but also errors in the subsequent recovery.
• Forecast errors were larger in countries that are more open to external developments and hence exposed to shocks from other economies.
• Larger forecast errors over 2007-12 have occurred in countries with more stringent pre-crisis labour and product market regulations.
• Growth in the recovery has been weaker relative to predictions in countries in which banks had low capital ratios pre-crisis.
• Stronger projected fiscal consolidation has been associated with weaker-than-projected growth, but this conclusion holds only in some years, and only when Greece is included. The repeated assumption that the euro crisis would dissipate over time, and that sovereign bond yield differentials would narrow, has been a more important source of error.
• The forecasting experience in the wake of the crisis has led to a number of changes in forecasting procedures and communication – in the OECD as well as in other forecasting institutions.
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