Assessing the World Bank’s growth forecasts

Abstract

In this study, the performance and rationality of the gross domestic product growth forecasts by the World Bank (WB) for six regional aggregates and 130 individual countries between 1999 and 2019 are assessed. A large body of literature examines macroeconomic forecasts for advanced economies by intergovernmental agencies. However, evaluations of WB forecasts for emerging and developing economies rarely exist. Therefore, this study provides the first comprehensive investigation of the WB’s growth forecast not only for regional aggregates but also for 130 countries between 1999 and 2019. The results of the investigation are summarized as follows. (1) The forecast performances broadly improved after the financial crisis of 2008–09; (2) the current-year forecasts are mostly unbiased throughout the sample period; (3) the next-year forecasts transformed from conservative to optimistic after the financial crisis; (4) the next-year forecasts are broadly rational when asymmetric loss is assumed; (5) the forecasts broadly exhibit full information rational expectation, while a few forecasts exhibit over- or under-reaction; and (6) the extent of improvement in forecast performance, conservativeness, optimism, and under- or over-reaction is not strongly associated with regions, exports and/or imports patterns, or income levels (with some exceptions). Uncertainty measures attached to point forecasts could provide useful information to policy makers and businesses worldwide.