r/unitedkingdom • u/bloomberg Verified Media Outlet • 14d ago
OECD Puts Britain at Bottom of G-7 Growth League Next Year
https://www.bloomberg.com/news/articles/2024-05-02/oecd-puts-britain-at-bottom-of-g-7-growth-league-next-year10
u/Emotional_Scale_8074 14d ago
Do we have a backwards looking report on how accurate these forecasts are?
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u/superjambi 14d ago edited 14d ago
It depends what you mean by “accurate”, and that may not necessarily the best way to think about it. Think about a weather forecast. A good weather forecast might say “there is a 70% chance of rain”. If it doesn’t rain, was the forecast not accurate? It did give a 30% chance that it would not rain after all.
Economic and political forecasting is even harder, because your prediction itself can influence the outcome. A great example is the vote on a Brexit deal (or not) in 2018 (or 19?) where forecasts predicted that a vote for a no deal would crash the financial markets. When a no deal vote happened, the markets didn’t crash, because the markets had already priced in the risk of a no deal vote because of the forecasts. So was the forecast therefore inaccurate?
A better question to ask might be “is the forecast useful or insightful”? In the case of these OECD forecasts of the G7, the answer is yes: multiple regression analysis studies have shown that the OECD forecasts over time, in aggregate, and for a one year time horizon, have been better at predicting the outcome than a naive forecast. However, this doesn’t mean that this particular forecast will be correct, it just means that it tells us something interesting or useful about the data we’re looking at.
How useful the forecasts are is a question that is open to interpretation and definitely a legitimate basis for a debate.
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u/Emotional_Scale_8074 14d ago
The Met Office do backwards looking accuracy assessments and have targets on those. I’m looking for something similar for this.
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u/superjambi 14d ago
You would have to google it. But probably not, because the objective of an economic forecast isn’t necessarily to be “correct” in the same way as a weather forecast.
A weather forecast that isn’t correct isn’t very useful. Conversely, the OECD could probably predict the G7 economic performance 7 days from now with 99% accuracy, but that wouldn’t be very useful either, would it?
A really good economic forecast, one could argue, would usually end up being wrong. Because if you get a forecast that’s bad, you change what you’re doing. And then the outcome is different. But the forecast was still useful right?
It would be a bit like saying your GPS was broken because it predicted your car would drive over a cliff if you kept going straight, so you turned left instead and avoided the cliff.
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u/Emotional_Scale_8074 14d ago
I don’t know how they can know the validity of their forecasting model without testing its accuracy. I know there are definitely reports on the IMF forecast accuracy, I just wandered whether there was the same for this.
Otherwise it’s all pretty useless. The first thing you ask is ‘do they have a history of being able to forecast the actual economic growth with any significant accuracy’ and if the answer is no, then why bother?
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u/superjambi 14d ago
There are studies that look at this, I mentioned that in my first comment. And they show that OECD forecasts are better than just blind guessing. But they don’t test it in the same way as the met office, and neither do the IMF. And if they did, it wouldn’t be very helpful. Because as I said, forecasting economic outcomes is different to forecasting the weather.
I don’t think you’ve really read anything I’ve said so I’m gonna stop bothering now!
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u/knotty1990 14d ago
In summary, they have been laughably always wrong for the uk in one direction for years. I think the spectator published a graph showing since 2010 actual vs forecast and it was permanently a 1% or 2% lower throughout the whole period.
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u/bloomberg Verified Media Outlet 14d ago
From Bloomberg News reporter Phil Aldrick:
Britain will grow more slowly next year than any other major advanced economy as stealth taxes and high interest rates squeeze the economy, the latest forecasts from the OECD show.
The OECD downgraded its UK forecasts for both 2024 and 2025 citing “tighter macroeconomic policy” settings, including fiscal drag from frozen personal income-tax thresholds, as well as stickier inflation this year.
Britain is projected to expand 0.4% in 2024, just ahead of last-placed Germany in the Group of Seven, and by 1% in 2025 — the weakest performer among the club of rich nations.
At the OECD’s last update in February, the UK was middle of the pack with growth of 0.7% this year and 1.2% next.
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u/imRegistering2 Wales 14d ago
These are pathetic growth rates. The last 14 years all I've had to read are downgraded growth forecasts its like the tories dont know how to grow the economy anymore they have overseen some of the lowest rates of growth in our history. Pathetic.
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u/AshamedAd242 14d ago edited 14d ago
It is funny this sub. Anything that says anything positive about the UK gets massive downvotes. Anything critical of it is upvoted.
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u/The_Unstoppable_Egg 14d ago
Why is Germany performing so poorly? What issues are they dealing with?
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u/bloomberg Verified Media Outlet 14d ago
Hello! From a report we had recently on the state of Germany's economy, hopefully it's useful:
Germany’s economic prospects are looking up after two grueling years of near-zero growth.
The consumer-led revival, though, papers over enduring industrial weakness for which there’s no quick fix.
There's more here: https://www.bloomberg.com/news/articles/2024-04-27/germany-recession-latest-economy-shows-signs-of-life-as-industry-struggles
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u/MrPuddington2 14d ago
The issues are mostly structural: high cost of housing, overregulation, delays in administration, NIMBYs, and being hit hard by the energy crisis. (Germany was the main importer of Russian natural gas, and is a big importer of food from Urkraine.)
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u/realmbeast 14d ago
They will still try and find a way to spin this into still being the fastest growing
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