An Assessment of IMF Medium-Term Forecasts of GDP Growth

This paper assesses the IMF medium-term forecasts—i.e., forecasts for three, four, and five years ahead—of GDP growth published in the WEO, covering most IMF member countries, over the period 1990–2012. Evidence is drawn from surveys and interviews with IMF staff, country authorities, and representatives of the private sector, as well as a quantitative analysis of forecast errors. Results indicate that IMF medium-term forecasts of GDP growth meet basic efficiency standards for about 70–80 percent of the member countries. There is no evidence of a systemic or built-in organizational bias specifically caused by the approach used by the IMF to produce medium-term forecasts. Stakeholders have a generally positive view of such forecasts and highly value the Fund’s medium-term analysis based on them. On the other hand, the tendency to overpredict GDP growth (i.e., an optimistic bias), previously found in other studies, exists for several countries in all IMF area departments and regardless of development stage and IMF program participation status. The paper argues that more attention should be placed on constructing a unified view about medium-term growth potential in major regions and countries to guide desk economists in their forecasts. The views expressed in this Background Paper are those of the author(s) and do not necessarily represent those of the IEO, the IMF or IMF policy. Background Papers report analyses related to the work of the IEO and are published to elicit comments and to further debate. JEL Classification Numbers: C530