Economic forecast is a process by which economists predict future economic trends and create insights into business planning and investment decisions. This can be done through a number of different methods, some which require little more than a statistical characterization of the variable to be predicted. These are commonly employed when the person making the forecast lacks either the time or the desire to study the why and wherefore of a particular economic variable. At the other extreme are dynamic stochastic general equilibrium (DSGE) models which use modern economic theory to produce a forecast disciplined by theory.
Global growth is projected to slow this year, as rising trade barriers and policy uncertainty weigh on activity. Downside risks to the outlook include a worsening of global financial conditions, further declines in official aid and escalating armed conflicts. Upside risks include a partial resolution of trade tensions, lower oil prices and more efficient technology adoption.
Various factors influence economic trends, with the most important being the actions of governments and central banks which control interest rates and money supply. Lower interest rates encourage borrowing and investment, which tends to stimulate economic growth. At the same time higher interest rates discourage lending and slow economic expansion, although they also help control inflation. Other factors which may influence economic trends are the actions of companies in the economy, natural disasters and the behaviour of financial markets. Taking a holistic approach to these factors can enable analysts to create accurate and insightful economic forecasts.
About the Author
