They aren’t actually that inaccurate. How good forecasts are depends first and foremost on the time horizon. The further that forecast look into the future, the less accurate it becomes. Moreover, economists have a tendency to be wrong in times of crisis. The British magazine The Economist found that between 2000 and 2017, the most important economic forecasts were off by around 0.6 percentage points during boom times and by 1.8 percentage points during recessions. Even in 2020, the year of corona, economic institutes sometimes differed considerably in their forecasts. One reason is the uncertainty in their assumptions. A forecast is always based on the current status quo.
In times of crisis, however, the assumptions change particularly frequently and dramatically, for instance when a country undertakes intervention measures. For economic growth forecasts, for example, it makes a huge difference if during a pandemic a government decides to provide state aid and short-time working benefits, thus following Keynesian economic traditions, or refrains from providing supportive state subsidies, in the spirit of monetarism. Furthermore, it’s not all that easy to obtain reliable data for calculations. An example: the service sector accounts for around three quarters of Germany’s economic output—but there is much less data available and its quality is worse than the economic data for the industrial sector. In the future, artificial intelligence and big data should help to better predict investment flows and regional industry trends.
