The accuracy of various analysts’ economic forecasts have improved the past two years, the Department of Finance (DoF) said on Friday.
“Among the 10 published estimates in the fourth quarter of 2018, the most accurate forecast was only 0.1 percentage points away from the official estimate compared to the weakest, which was 0.4 percentage points higher than the official figure,” the DoF said.
The remark has reference to a recent incident in which the various private analysts, economists and other watchers were incensed by DoF comments claiming that their readings succeeded only in pushing headline inflation, the white-hot topic at the time, further up instead of down.
“Only two out of 10 forecasts have errors greater than five percent, an improvement from seven out of 15 forecasts with errors above five percent in the third quarter of 2018,” it added.
But the DoF’s Strategy, Economics and Results Group on Friday said analysts’ forecasts on both inflation and gross domestic product (GDP) growth have improved.
According to Finance Undersecretary Karl Kendrick Chua, quarterly forecast errors for the 2016 to 2018 period averaged 5.6 percent, with 13 out of 20 forecasters scoring an average error of more than five percent.
The agency said that an error of five percent or less is considered a good forecast.
“The error is defined as actual or observed value minus the forecasted value, as a percentage of the actual value. The smaller the MAPE (mean absolute percentage error), the better the forecasts,” Chua explained.
Only two out of 10 forecasts have errors greater than five percent, an improvement from seven out of 15 forecasts with errors above five percent in the third quarter of 2018.
“As with inflation forecasts, we did the assessment to see how well analysts were in forecasting GDP growth. The results based on published forecasts from 2016 to 2018, show that accuracy, on average, has improved recently,” he added.
The Finance executive also acknowledged that unwarranted expectations in the third quarter of 2018 may have driven the faster-than-anticipated climb in prices.
Among the institutions and analysts rated by the DoF include Jun Neri from the Bank of the Philippine Islands, Angelo Taningco of Security Bank, Alvin Ang of Ateneo de Manila University, Rajiv Biswas of IHS Markit and Nicholas Mapa and Joey Cuyegkeng of ING Bank among others.