An economic forecast is the prediction of an economy’s quarterly or annual GDP growth rate, a top-level macro number that many governments and businesses use to determine investments, hiring, spending, and other important policies. Large companies often have in-house economists to focus on assessing forecasts that are pertinent to their business, and government officials typically take into account economic forecasts when creating fiscal and monetary policy.
Economic forecasts are influenced by many factors, including central bank policies and global events. Monetary policy, such as interest rate adjustments and money supply controls, can have a big impact on economic trends by encouraging or discouraging borrowing and investment, while global events can change exchange rates, affect global supply chains, and contribute to inflation.
Forecasting accuracy is impacted by the education and work experience of forecasters, as well as their behavioral biases. Forecasters’ tendency to play it safe may lead them to shy away from making bold predictions that could damage their reputations. However, McCracken says research has shown that there are ways to improve the accuracy of economic forecasts. For example, there are now numerical measurements of uncertainty that can be incorporated into models to help reduce the influence of subjective judgment in predicting future economic variables.
The global outlook for 2025 has been downgraded as a result of rising trade barriers and elevated policy uncertainty. A number of downside risks remain, including weaker-than-expected growth in oil exporters, escalation of armed conflicts, and extreme weather events.