Accuracy of analysts’ forecasts better in Q4
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Fri, 15 Feb 2019 16:27:48 +0000
THE accuracy of growth forecasts published by economists from prominent institutions improved in the fourth quarter of 2018, the Finance department claimed on Friday.
In a statement, the department said that among 10 published gross domestic product growth (GDP) projections, the most accurate was just 0.1 percentage points away from the official forecast (an error of 1.6 percent) compared to the weakest, which was 0.4 percentage points higher or off by 6.6 percent.
Only two out of 10 forecasts had errors greater than 5 percent, an improvement from seven out of 15 forecasts with errors above 5 percent in the third quarter of 2018, it added.
The analysis was made by the department’s Strategy, Economics and Results Group, headed by Undersecretary Karl Kendrick Chua, that looked at forecasts detailed in Manila’s daily newspapers.
The mean absolute percentage error (MAPE) method, which involves computing the average of the absolute percentage errors of analysts’ published forecasts from the first quarter of 2016 to the fourth quarter of 2018, was utilized.
“The error is defined as actual or observed value minus the forecasted value, as a percentage of the actual value. The smaller the MAPE, the better the forecasts,” Chua said.
“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.
“For example, the average error in the fourth quarter of 2018 was down to 4.0 percent from 10.1 and 5.4 percent in the second and third quarters, respectively.”
The department noted that from 2016 to 2018, quarterly forecast errors averaged 5.6 percent, with 13 out of 20 forecasters scoring an average error of more than 5 percent.
The best forecaster registered an average error of 3.1 percent while the widest margin was 7.2 percent. An error of 5 percent or less was considered a good forecast.
The most to least accurate of those who published forecasts for seven or more of the 12 quarters covered in the analysis, the Finance department said, were the following:
• Security Bank;
• Ateneo de Manila University;
• Institute for Development and Econometric Analysis;
• University of Asia & the Pacific;
• De La Salle University;
• Land Bank of the Philippines;
• BDO-Nomura;
• Union Bank of the Philippines;
• Asian Institute of Management;
• University of Sto. Tomas;
• DBS Bank;
• Metropolitan Bank and Trust Company; and
• ANZ Philippines.
The most to least accurate among those who published six or fewer GDP forecasts from 2016 to 2018 were:
• Bank of the Philippine Islands;
• IHS Markit;
• ING;
• University of the Philippines;
• Standard Chartered Bank;
• Rizal Commercial Banking Corp.;
• and Hongkong and Shanghai Banking Corp.
The economy grew 6.1 percent in the fourth quarter of 2018, bringing full-year growth to 6.2 percent.
Among the analysts polled by The Manila Times, those from HSBC and IHS Markit were correct on their full-year GDP forecasts.
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