Economic forecasts aren’t the least of COVID-19’s victims. Never has any human being seen such widespread and devastating revisions to the global growth outlook as we’ve seen in the past few weeks—it has no historical peer. Radical adjustment of forecasts is bad enough, but to make matters worse, relevance requires repeated revision; resets are obsolete almost as soon as they’re released. Clearly, this is doing nothing to calm the fears of transfixed consumers and businesses. It feels a bit like we’re free-falling in a bottomless pit; do we now have a better grip on the outlook?
It seems so. Numbers are now coming in that clearly illustrate the impact that the lockdown is having on economic activity. China was first to release shocking data releases; now they’re commonplace. Respected global forecasters, like the Organisation for Economic Co-operation and Development (OECD), the Institute of International Finance (IIF) and the International Monetary Fund (IMF), have all radically changed their outlooks, and private sector pundits in banks, research institutions and elsewhere are following suit. Others, frustrated by the pace and severity of change, have elected to cease their forecast operations until further notice. The IMF revisions say it all: world growth for this year was reduced from the previous forecast call by 6.3 percentage points. That’s a plunge that makes the world’s scariest roller-coasters look ruler-flat.
EDC Economics has responded to the situation by amping-up our forecast process. We’re actually in permanent forecast mode until further notice. That looks like a capitulation and an acknowledgement of untrackable chaos. Far from it; there are at least three good reasons for an episodic continuous process: first, indicators are only just coming to light. It’s easy to forecast direction of movement, but the magnitude of change is so radical that precision requires immediate adjustment. Second, shock-and-awe policy announcements are almost a daily occurrence, somewhere in the world. Keeping up with new measures requires a similar cadence of monitoring and forecast adjustment. Third, the coronavirus has put us into uncharted territory with daily concerns about flattening the infection curve and return-to-work policies. Precision on exit strategies and economic consequences requires constant vigilance. Forecasts that don’t keep up are worthless...
This was excerpted from a 30 April 2020 article written by Peter G. Hall, Vice-President and Chief Economist, Export Development Canada.