Forecasting the developing world

The accuracy of the forecasts for the developing world made by the International Monetary Fund from 1980 to 1988 is analyzed in this paper. The forecasts are for the growth in real output, exports and imports, the inflation rate, long-term debt, the current account balance and the ratio of reserves to imports. The developing world is divided into five regions, Africa, Asia, Europe, the Middle East and the Western Hemisphere, and the forecasts are for each region. Overall the IMF's forecasts are inferior to those generated by a naive model, a simple random walk, although the differences are not usually significant. When allowance is made for changes in forecasting difficulty (measured by the performance of the naive model) the IMF's forecasting accuracy does not improve significantly over time and for somew series it deteriorates. The results suggest that there is no reason to prefer the IMF forecasts for the developing world over those that can be obtained by assuming a simple random walk.