Economy activity 2009: forecasts and reality

For years the Ifo Institute has critically examined the quality of its own economic activity forecasts, discussing the reasons for differences between its forecasts and reality. In the wake of the dramatic worsening of the world financial crisis, at the end of 2008 the Ifo Institute clearly revised its forecast for Germany downwards, in comparison to the autumn forecast of the institutes, but it still underestimated the extent of the economic downturn. The forecasting error, on average for the year, of 2.8 percentage points is due to a considerable extent to an underestimate of the statistical underhang at the end of 2008. The remaining forecasting error of 1.7 percentage points is a result of a miscalculation of the course of economic activity in 2009. All in all, the recession in Germany was deeper than had been anticipated in December 2008.