A Comparison of Economic Forecasts by the Joint Economic Forecast and German Federal Ministry

The economic forecasts by the German Federal Ministry of Finance deviate from the economic forecasts made by the Joint Economic Forecast Project, which is drafted by the Joint Economic Forecast Project Group, without systematically being higher or lower than it. These deviations, however, do not lead to any improvement in forecasting quality. The changes in forecasting errors resulting from these deviations even out for longer forecasting time periods. Moreover, the forecasts – by both the Joint Economic Forecast Project Group and the German Federal Ministry of Finance – are too optimistic over longer time periods. Both institutions have published GDP forecasts in the past that are higher than the respective actual figures for GDP. The reason for the systematic over-estimation of the long-term trend in GDP seems to be the false assessment of interpreting growth in German GDP in real time as a cyclical, and thus temporary, weakness.