DOF, IMF develop new economic forecasting tool
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The Department of Finance (DOF) and the International Monetary Fund (IMF) are working to integrate a new forecasting model into the department’s existing Forecast and Policy Analysis System to strengthen its capacity to project economic trends and assess the effects of policy changes.
The Climate-Adjusted Economy Model (CAEM), developed by the IMF’s Institute for Capacity Development, will complement the DOF’s existing analytical tools and provide a framework for macroeconomic forecasting tailored to the Philippines’ economic and policy environment, the IMF said.
“The primary goal of this technical assistance project is to further enhance the DOF’s capabilities by developing and institutionalizing a macroeconomic forecasting tool tailored to the Philippines' economic and policy context to complement other existing policy analysis tools at the DOF,” the IMF said.
The model incorporates data management, model assumptions, sectoral projections and reporting functions. It is designed to support two main forecasting tasks: developing baseline projections for key macroeconomic variables and assessing the effects of economic or policy shocks through alternative scenarios.
The DOF requested technical assistance from the IMF’s Institute for Capacity Development in 2022 to improve its macroeconomic analysis and forecasting capabilities.
An IMF scoping mission in 2023 assessed the department’s forecasting and analytical requirements and recommended that the DOF adopt the CAEM alongside its existing tools. It also recommended customized training for DOF personnel in macroeconomic forecasting.
The IMF said implementing the model would require the DOF to dedicate additional resources to analytical work, including detailed literature reviews and independent quantitative exercises to help calibrate the model.
The department would also need to develop a detailed user manual covering the operation of the forecasting tool, including data collection, model solving, output generation and version-control procedures for tracking changes to the model and its underlying assumptions.
The project is part of the IMF’s technical assistance to strengthen the Philippine government’s capacity for economic analysis and policy formulation.
