Analysts at Századvég’s Economic Trends Research Institute have examined how accurately had forecasts for the German economy described GDP change over the past 10 years. The heat map below shows the gap between estimates for the growth of the German economy and actual GDP growth over the period 2015-2024. The institutes that issued the forecasts were selected on the basis of their international weight and their local roots.
Looking at the last ten years, two distinct periods can be distinguished. On average, analysts underestimated the performance of the German economy in the period 2015-2017, but this trend reversed from 2018 onwards, when forecasts tended to overestimate German growth.
The period from 2020 to 2022 was a period of crises. The pandemic and the escalation of the Russia-Ukraine war created an unpredictable economic environment, which the forecasts could not track, and, as a result, significantly under- and overestimated the growth rate of the German economy.
In 2020, the economy shrank significantly as a result of the coronavirus crisis, while 2021 brought underestimation on the back of a faster-than-expected recovery. Crisis-related misestimation occurred not just for Germany, but also in the economic forecasting of other countries.
However, amid the Russia-Ukraine war and the announcement of successive sanctions packages, German economic growth fell short of experts’ expectations more significantly than before. In 2022, German GDP growth was expected to be 1.8 percentage points higher than it eventually turned out to be, while in both 2023 and last year it was expected to reach a growth rate roughly one percentage point higher. Notably, after the recession year 2023, analysts again overestimated the expected economic output.
The forecasts examined suggest that the most influential analysts, both individually and in aggregate, trended to overestimate the growth potential of Europe’s largest economy in recent years. A key factor in this may have been the underestimation of the impact of European economic sanctions, which led forecasters to paint a much more positive picture of the German economy than was actually the case.
Quarterly forecasts from 2015 to 2024 from 5 institutions (IMF, OECD, European Commission, Kiel Institut, Bundesbank) are all biased in the same direction. Each heat map cell shows the deviation of the forecast issued in a given quarter of a given year from the actual data and the same for the forecast issued in the same quarter of the previous year. To illustrate with a practical example, for the OECD, the Q1 2016 cell shows the difference between the actual data and the average of the estimates for 2016, published in Q1 2015 and Q1 2016.
