Economic activity in 2010: Forecasts and reality

This article discusses the reasons for the differences between the forecasts for 2010 and what real occurred. In light of the enormity of the economic dislocations in the world that were caused by the global financial and economic crisis of 2008/09, economy forecasting was pushed to its limits and greater forecasting revisions and forecasting mistakes than usual were the result. For the dimensions and the temporal course of the economic collapse in Germany and the rapid subsequent economic recovery there was simply no prior experience that the forecasters could have systematically evaluated. The economy thus progressed much better in the course of 2010 than the Ifo Institute predicted in its December 2009 forecast. To be sure, the Institute had excluded a relapse into a further recession and in comparison to the by far more pessimistic forecast of the Institutes of October 2009 had increased the growth forecast for the German economy by 0.5 percentage points to 1.7%. The Institute did not anticipate, however, such a broad-based economic recovery that ended in a strong upswing.