TIM COHEN: Now we have a clue why SA gets growth projections so wrong, let’s fix it
Turns out that in practice the IMF is the key and economists tend to check their numbers against its forecasts
Previously in this column I have noted how often SA’s economists both inside and outside the government have been so wrong about projecting SA’s growth. I make the point without necessarily disparaging the job they are doing; as they say, making predictions is extremely tough, especially when you are talking about the future. But still, you have to ask: what are they all missing? First, how bad is the problem? It’s worth asking because some argue there is a kind of necessary optimism — perhaps you can call it structural optimism — involved in forecasting GDP growth. All organisations, including the IMF, tend to overestimate rather than underestimate growth because the incentives to do so are enormous. We all hope for the best in the future, so predicting declines is unpopular. Being overly pessimistic is castigated while being overly optimistic is forgiven with slight sanction. But even if you take that into account, SA’s numbers look particularly bad. The medium-term budget policy ...
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