In 2001, Prakash Loungani, an economist at the International Monetary Fund, surveyed the accuracy of economic forecasts throughout the 1990s. They were useless. “The record of failure to predict recessions is virtually unblemished,” he concluded.
Now Loungani has updated his research to the past few years, and economists’ “record of failure remains impressive”, as Tim Harford notes in the FT. He looked at data for 77 countries, of which 49 fell into recession in 2009.
Economists had not called a single one of these recessions by April 2008, even though the news was full of the ‘credit crunch’, and Northern Rock and Bear Stearns had collapsed. “It did not take a genius to see trouble was on the way.”
Yet, even in September 2008, the consensus remained that no country would suffer a contraction. By September 2009, analysts had got the message, but then went overboard the other way: 54 recessions were predicted, five more than there actually were.