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Eduardo Martínez Abascal, Professor, IESE, University of Navarra
The International Monetary Fund (IMF) has just published (on January 26th) its economic forecasts for 2010. Spain will decrease by 0.6% (still in recession), while our neighbors will come out of it: Germany will grow by 1.5%, France by 1.4% and Italy by 1.0%. The topic has had a lot of echo in the press and with rather catastrophic overtones. The analysts of various international banks - the so-called experts - have also echoed the news, and have recommended not to invest in Spanish stocks or bonds.
Is the IMF reliable in its forecasts? Well, let's at least look at the most recent ones for the last two years. In July 2008, it predicted a world growth of 3.9% in 2009 for Economics . This is "normal" growth, neither too high nor too low. It should be noted that in that month we were already a year into the financial crisis, which began in August 2007, although the worst was yet to come. World economic growth in 2009 was -0.8%. The strongest crisis in the last 60 years. The deviation between the forecast and reality is enormous, especially when we are talking about average world growth, which, since it includes many countries, tends to have very slight fluctuations.
According to the IMF (July 2008 forecast), Spain was to grow by 1.2% in 2009. The reality is that economic growth in Spain in 2009 was -3.6%, the worst figure in 70 years. Once again, the IMF has exceeded its forecast... and by far.
The reader may think that I am unfair or biased in the comparison, as I am using data of the worst crisis ever seen in the last 70 years. From agreement. I take now the forecasts made by the IMF for Spain in January 2009, only a year ago, and when the crisis was already in plenary session of the Executive Council rage. The IMF expected Spain to decrease by 1.7% in 2009. The result has been a fall of 3.6%. Again a big mistake.
It cannot be concluded from these data that the IMF is doing its forecasting work wrong. But it can be concluded that the forecasts are not as reliable as one might think. And why? Well, because forecasting the growth of Economics means forecasting, to a large extent, the behavior of consumers and investors (forecasting the behavior of all of us), and this is not easy, if not impossible. Should we listen to the IMF? Yes, but their opinions cannot be taken as dogmas from heaven. They can be wrong, and very wrong.