Status: 10/27/2021 11:48 a.m.
How much will the economy grow or shrink in the near future? Economic forecasts should answer this question. But how do researchers come to their predictions – and for whom are they important?
Time travel is possible in the film: “Back to the Future” takes a sports car as a time machine into the future and back again. It is much more sober with economic researchers. Your time machine is the economic forecast. But that has its limits, explains Timo Wollmershäuser. He is responsible for the forecasts at the Munich Ifo Institute. “We are not clairvoyant, we cannot see into the future,” he says. It is only possible to continue writing things “from which we have already had experience from the past”.
In practice it looks like this: Economic research institutes such as the Ifo Institute collect data from companies – for example production data from industry or sales figures from retail. From this, they use complex models to calculate their economic forecast for the current or the coming year.
Many factors make accurate forecasts difficult
But this forecast is fraught with great uncertainties – especially now in the Corona crisis. Most recently, the institutes had to revise their joint forecast downwards: In the spring, economic growth of 3.7 percent was assumed, in autumn only 2.4 percent, says Wollmershäuser.
“In principle, in the spring it was not clear to us what the longer-term effects of the corona crisis would be, so to speak,” explains the researcher. “We only ever saw the opening and closing.” First the corona restrictions and then the rapid and strong recovery of the economy – this has led to major delivery problems for raw materials and intermediate products around the world. In many companies, the machines keep coming to a standstill.
“We are not clairvoyant, we cannot look into the future” – Ifo economic researcher Timo Wollmershäuser
Economists did not expect such serious problems to arise – they were caught on the wrong foot. Not uncommon: on average, the forecast error, i.e. the deviation of the forecast from the actual development of the gross domestic product, is one percentage point.
Jörg Krämer, Commerzbank’s chief economist, also creates forecasts for his bank customers. Sometimes he gets annoyed when he’s wrong. Despite all the criticism of the economic forecasts, large companies in particular are interested in the data, says Krämer. “Of course, the companies first look to see what is happening in their own markets, what are their customers doing and where there are changes,” said Krämer. “But of course you also have to get an idea of how the economy is developing, because that also affects your business.”
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State as the most important customer for economic forecasts
The most important customer for economic researchers is the state. Because the economy largely determines how high the tax revenue is. A percentage point difference can very quickly flush a few billion euros more or less into the treasury.
In the future, the economic researchers want to collect even more data, especially from everyday life. “We are currently experimenting with electricity data, for example, with electricity consumption that is available on a daily basis,” says Ifo economic expert Wollmershäuser. The researchers are also interested in real-time mobility data. For example, how many people are shopping in stores with their smartphones or how many trucks are on the streets. But how reliably these data describe the economy and at least get a little closer to the future – this is what economic researchers around the world are discussing.
The forecasts made by experts from the federal and state governments, municipal associations, research institutes, the Bundesbank and the Federal Statistical Office are the basis for public budgets. The working group bases its estimates on key macroeconomic data from the federal government. He does not have a fixed set of forecasting tools. The experts go to the meeting with their own forecast for each individual tax, which they develop using their own methods and models. In the course of the conference they agree on a result. This is then traditionally published by the Federal Ministry of Finance.
In May each year, the “major tax estimate” is due for the current and the four following years. The “small tax estimate” is always in November, in advance of the adoption of the budget in the Bundestag. Then they say
Experts forecast tax revenues only for the current and the coming year.
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Constantin Röse, ARD stock exchange studio Frankfurt, October 27th, 2021 8:06 am