Economic Forecasts: Mistakes, Horrors, and Blaming the Government

Businessmen dedicated to the commercialization of economic information, known as city economists or business consultants, once again failed in the forecasts delivered at the beginning of the year about what was going to happen in 2022. Could it be otherwise? ?

Although reiterated, it does not cease to amaze: they are wrong time and time again and, despite this, they continue to present themselves to society as bearers of indisputable economic knowledge.

At this point, those who are not trapped in their fictions know that the majority is functional to the interests of economic power. This means that the analyzes and projections are at the service of building negative economic expectations if it is a government they do not want, and positive or neutral if the national administration is in the hands of a political force they sympathize with.

In this year that is ending the sequence of fiascoes did not disappoint:

* They stated that the Economy was entering a recession, and that did not happen.

* They assured that the quarterly goals would not be met with the IMF, and that did not happen.

* They declared on more than one occasion that sooner or later there would be a strong devaluation, and that did not happen.

* They were even wrong in the inflation projections, in this case by less and they did it rudely, since the increase was twice what they estimated.

* They expected less dynamism in the labor market in job creation, and unemployment dropped to single digits.

The pictures that accompany this article are eloquent. Information from more than 20 analysts and institutions was analyzed, including large consultancies, local banks, international banks, sovereign risk rating agencies and credit agencies.

The following variables were studied to compare the predictions with what actually happened:

The task of these professionals dedicated to the commercialization of economic information is not limited to distributing projections of figures of key macroeconomic variables. 

They also actively participate in the daily economic debate with withering statements that, in order not to clash with the forecasts, later turn out to be wrong, although in some cases they acquire a stage of madness. They say, to justify their mistakes, that the fault is not theirs but "the perversity" or "the inconsistency" of the government's economic policy.

Here some samples are shared and contrasted with what actually happened (the sources from which the statements were collected can be found by clicking on the issuer's name):

- Dante Sica (Abeceb).

* "When building scenarios for the economy, in Argentina it is difficult to avoid the feeling of déjà vu: the feeling that situations are repeated year after year."

* “2022 will not be the exception because it will have a start similar to that of recent years in two key dimensions: a fiscal deficit that cannot be financed without issuing, and unapproachable maturities, mainly with the IMF, as the access to external credit.

The reality: This diagnosis was not verified. The Treasury's financial program implied peak placements in local currency and the Government renegotiated with the IMF.

- Guido Lorenzo (LGC).

* “The country is recovering from the level of activity drop caused by the pandemic, but the Economy that has been stagnant for 10 years has not changed at all. I doubt that growth in activity can be sustained. By statistical drag it can be a positive number, but it will not be felt.

The reality: The Economy will grow more than 5 percent this year with high possibilities of continuing the progress in 2023, thus completing three years of rising GDP.

* “Part of the stagnation of these years has to do with the inability to generate investment opportunities; without that investment employment does not grow. The lack of predictability of our Economy avoids getting out of this circle, to which are added policies that do not collaborate either, such as financial repression”.

The reality: The level of Investment in relation to GDP is the highest in the last 29 years (22.3 percent), and unemployment ends the year at 7.1 percent.

- Camilo Tiscornia (C&T).

* “There will remain a statistical drag from 2021 of 3.0 percent, although it remains to be seen what will happen with the Covid-19 and the harvest, so we see an increase in GDP of 2.5 percent, that is, an almost recessive scenario”.

The reality: Not only was there no recession, but the Economy expanded at 5-6 percent.

- Goldman Sachs.

* "The agreement with the IMF remains an open issue with a difficult and uncertain resolution given the lukewarm willingness of the authorities to adopt a macroeconomic adjustment."

* "The IMF faces significant reputational issues when signing a new program with Argentina, whether it is a light or full program, given the high risk of repeated failures."

* "Without a credible policy framework supported by structural fiscal adjustment and tighter monetary policy, the external competitiveness gains from currency devaluation are likely to be short-lived, fueling inflation. growth will slow down drastically in 2022, but inflation will not. Fiscal adjustment is urgent, but it is not being sought."

The reality: Argentina signed an agreement with the Monetary Fund and approved the first three quarterly reviews.

- Carlos Melconian (Macroview, Ieral)

* “The price of the dollar is unfeasible. What we are in is a process of permanent demand. Argentina is an Economy that trades in pesos and saves in dollars, and in times of conflict it asks for more dollars. The only thing that calmed all that was convertibility, until the excess ended badly, that is history”.

The reality: The official exchange rate did not record sudden jumps, it remained in line with inflation, while financial dollars rose 30 points less than the inflation rate.

- Miguel Angel Broda.

* "Two agonizing years of extremely low growth and high inflation are coming. This year we are going to grow at a zero rate."

The reality: It was not a mistake, but a horror: the Economy grew up to 5 percent.

-Jose Luis Espert.

* "The next two years will be very critical for Argentina. Even if there is an agreement with the IMF, the adjustments that must be made are strong."

The reality: The Economy ends up growing, with dynamic consumption and a job market with a single-digit unemployment rate.

* “The IMF cannot accept a country that is going to request a rollover to avoid paying without an economic plan, because it is a cascading effect with the rest of the countries. On the Argentine side, I think they are speculating with a very strong diplomatic effect given that the help they have given Mauricio Macri was exceptional."

The reality: The Monetary Fund negotiated the debt with Argentina with a plan without a sudden adjustment of the economy.

- Ramiro Castiñeira (Econometric). 

* “There are no good expectations for 2022, with an Economy that in macroeconomic terms stagnated at pre-covid levels, accelerating inflation and, above all, a 100 percent exchange rate gap that caused a very important gap between the prices that the properties had and the cost of construction”.

* "All this in a scenario that has not been completely corrected and with a market that is expecting a possible devaluation, as a result of the fact that the Central Bank ran out of reserves and seeing if the IMF bailout appears or not and is of sufficient magnitude or not.

The reality: pessimistic diagnosis on growth, reserves, exchange rate and the IMF that collided with the hard data of the economy.

- Roberto Cachanosky.

* "I don't know if they are going to pay because these people are unpredictable. I don't know if they want to fix it or not because there is an ideological flaw of Kirchnerism with the IMF."

The reality: There was no default and the last debt default (in pesos) occurred at the end of the government of the macrismo-radicalism alliance.

- Marina Dal Poggetto (EcoGo).

* “The Economy is undergoing perverse dynamics but the apocalypse that I myself predicted did not happen. Massa keeps pulling rabbits out of the hat, and she has hellish creativity. If the financial repression scheme is maintained, this can continue for a long time, but this is not a stabilization plan.

The reality: The dialectical juggling is notable: the errors in the forecasts have nothing to do with the conceptual weakness to carry them out, but in the "perversity" of the economic dynamics and in the management ability of Minister Massa.

- Miguel Angel Broda.

* "The government has a logic that is inconsistent with economic theory and an enormous capacity for not learning. We did not reach October without an acceleration of the crisis. All this, forced because we have no reserves. We probably have to devalue and without having a program, which is worse.

The reality: What does one more stain make a tiger?

Why do they insist?

Revisar los pronósticos que hicieron los economistas de la city no fue complicado debido a que la vidriera de exposición son los medios de comunicación. Tienen la fortuna de no padecer reclamos de sus clientes por vender fallidos.

El programa de estudio de la Facultad de Ciencias Económicas tiene más de 30 materias, y para recibirse los alumnos deben presentar una tesina sobre un tema específico con su respectivo tutor.

El plan de la carrera se ha modificado en varias oportunidades. Ni antes ni ahora existe una sola materia que enseñe a realizar pronósticos. No estudian proyecciones ni estimaciones de variables macroeconómicas.

Nadie instruye a los alumnos en el método para saber qué va a pasar. No lo hacen porque no existe. Sin embargo, apenas cruzan el umbral de la facultad con el título, la demanda a esos profesionales con conocimientos básicos de economía es qué diga lo que va a pasar.

¿Para qué sirven entonces las proyecciones económicas, que en estos días se presentan para el 2023, si sus promotores no pegan una?

Se dedican a la futurología abusando de la inocencia de la opinión pública. Los temas de economía en los medios de comunicación son el paraíso de los lobbies. Se dedican a señalar con mandato autodelegado qué es lo que se debe hacer en la economía. En realidad, están influenciando, ejerciendo lobby, presionando.

They maintain a discourse that they expose as technical but it is fundamentally political and ideological. Economics is not an exact science as many of these professionals lead the majority to believe.

At this point, one must think that it is only an existential survival instinct, making forecasts, always unsuccessful: they would stop being what they are if they admitted that they had taken the wrong path; obviously not that of lobbying and promoting conservative policies.

Finally, a reminder: we are already writing down the forecasts you are making for 2023.

Report: Federico Kucher.

* "All this in a scenario that has not been completely corrected and with a market that is expecting a possible devaluation, as a result of the fact that the Central Bank ran out of reserves and seeing if the IMF bailout appears or not and is of sufficient magnitude or not.