Governments, businesses and households need forecasts to
help them prepare budgets and make investment and spending decisions. Today,
however, it is difficult to treat these forecasts with a high degree of
certainty. Forecasts of oil or gold prices, inflation and economic growth all
rest on assumptions that can change rapidly following a political decision, a
war, or an unexpected economic or environmental development.
اضافة اعلان
Economic forecasts should not be issued lightly. Economic
growth is influenced by investment and consumption, energy prices, interest
rates, trade, public and business confidence, and other factors. Higher oil
prices may increase revenues in producing countries while raising transport and
production costs and putting pressure on household incomes in importing
countries. Even within the same country, some sectors may benefit while others
suffer. A projected growth rate may therefore be achieved even as living
conditions deteriorate for large segments of the population. The aggregate
figure alone does not explain how gains and losses are distributed.
An increase in oil prices caused by supply disruptions
may also weaken subsequent demand if it slows down the economy. It may prompt
governments to draw on their reserves or increase production from other
sources. Identifying the variable that influences the indicator being forecast
is therefore not enough. We must also understand how markets and governments
respond to it, and how long those responses take to become apparent.
Gold offers a clear example of these interacting effects.
Political tensions may increase demand for gold as a haven, but they may also
push up oil prices and inflation, strengthening expectations of interest rate
increases and boosting bond yields and the dollar, which puts pressure on gold.
The same event can therefore push prices in two different directions. Relationships
among economic, political and environmental variables are interactive, rather
than a mechanical chain in which every event produces a fixed outcome.
A forecast’s time horizon is also no less important than
the figure itself. An estimate may be useful for assessing gold’s direction
over a few weeks, while the factors influencing it may change over several
months. Longer-term forecasts are affected by shifts whose timing and scale are
difficult to estimate, including technological change, climate change and
shifts in the balance of economic power. It is a mistake to compare a forecast
of a commodity’s price at the end of a month with a forecast of its annual
average price, or to assess both in the same way.
Attention must also be paid to who issues the forecast.
Some organisations that publish price estimates have interest in the markets
concerned, and their forecasts may serve commercial or political objectives.
This does not mean dismissing them outright, but it does require understanding
their assumptions and interests and reviewing the accuracy of their previous
forecasts. It also means asking whether they disclose incorrect forecasts and
explain their revisions as clearly as they publicise successful predictions.
Mathematical models and artificial intelligence have
improved our ability to process data and identify patterns in economic
indicators. Yet they cannot guarantee that past relationships will persist or anticipate
every new shock.
Forecasts are therefore more useful when presented as
scenarios explaining what might happen if oil prices rise, interest rates
change or trade is disrupted, and when revised as their underlying assumptions
change. These scenarios should show the range of possible outcomes, rather than
replace one definitive figure with several others.
We need forecasts to plan, but their value lies in
helping us prepare for different outcomes, rather than offering a single number
that suggests the future is already settled.
