Many economic forecasts appear for the new year. But don’t trust them. These predictions are always wrong.
At the beginning of each year the same question always arises: How will the next year be? But actually it is nonsense to make forecasts for the economy. They are always wrong. The past year was an impressive example of this. The Deutsche Bundesbank actually assumed that the German economy would grow by 4.2% in 2022. But then Russia attacked Ukraine. Now everyone is happy that the increase is around 1.9%.
Nobody predicted the severe financial crisis from 2008 or the corona pandemic from March 2020. It turned out worse than expected. Now it’s not surprising that one-off events throw all forecasts into disarray. But even in normal years, the economic forecasts fail and are reliably wrong.
The British business magazine The Economist maintains a huge archive of economic forecasts and has determined for the years 2000 to 2017 that the forecasts were wrong by an average of 0.6% in an upswing and by as much as 1.8% in recessions.
Even the current year cannot be calculated exactly. If the growth for the next four months is estimated at the beginning of September, there is still an error of 0.4% on average. And it gets worse as the periods get longer.
Anyone who would like to know how the economy will develop in 2 years should never look at forecasts. They are always wrong and do no better than simply extrapolating the current growth rate. Anyone can do that, you don’t need economists for this nonsense.
But undeterred, the economic research institutes are also issuing medium-term economic forecasts. The IFO Institute for Economic Research currently estimates that the German economy will grow by 1.6 percent in 2024. That’s guaranteed to be wrong, or pure coincidence if it turns out to be right.
The future is uncertain and unknown. This knowledge is no rocket science, but is still totally ignored. Simply, because it would be unbearable to admit this fundamental uncertainty. But nobody has that crystal ball!
Sven Franssen