In recent weeks, the IMF came under some criticism for posting relatively gloomy forecasts for the U.S. economy, especially considering the White House rosy outlook that stands out in comparison. see for example, WSJ on the subject here: https://www.wsj.com/articles/imf-sees-u-s-potential-growth-at-half-the-pace-of-white-house-estimates-1528995732.
Which begs two questions:
- Does IMF have any grounds to stand on its forecasts divergence from the White House? and
- Are IMF forecasts for the U.S. economy actually any good?
Firstly, the grounds:
Per above chart, the IMF is not alone in being less than exuberant about forward growth forecasts for the U.S. In fact, it is White House that appears to be an outlier when it comes to 2020-2023 outlook.
Secondly, per the question above, I crunched through IMF's semi-annual forecasts releases from April 2013 on (period prior to 2013 is too volatile in terms of overall fundamentals to take any forecast errors seriously). The chart below summarizes these against the actual outrun:
Average error for 1 year ahead forecast for the U.S. in IMF releases has been 0.037 percentage points (very small), rising to 0.476 percentage points for 2 years ahead forecasts (more material error), and 0.867 percent for 3 years ahead forecasts. Augmenting data (to achieve larger number of observations to 2000-2006, 2011-2014 periods, 4 years ahead average forecasts has been 0.867 percentage points above the outrun growth. And so on.
So, to summarize:
- IMF is not unique in being less optimistic on the U.S. economy than the White House;
- IMF's history of forecast errors suggests that the Fund tends to be overly optimistic in its forecasts and that current official Fund forecasts are more likely to be reflective of significant over-estimation of future growth than under-estimation;
- IMF's forecasts more than 1 year out should be treated with some serious caution - something that applies to all forecasters.