Occasional Paper: May – 2013: The Risk Behind Agricultural Forecasts
Published 16 May 2013
Too often we see ‘economic projections’ or ‘forecasts’ used unwarily. The International Monetary Fund (IMF) failing to estimate the consequences of European austerity measures on the European Union (EU) growth rates is a prime example. A core assumption of the IMF model in 2010 was that a 1% decrease of public spending and a 1% increase in tax for EU member countries would result in a decrease of 0.5% of the EU’s GDP in the period 2010 to 2011. However, the assumptions surrounding the impact of austerity measures were too low in this instance, and ultimately the EU’s GDP decreased by 1.5% for that period.