#MARKETS & INVESTING
A year before every recession of the last quarter century, economists were forecasting... growth, almost every time.
Published on August 19, 2026
Zidong An, João Tovar Jalles and Prakash Loungani (IMF) compared GDP growth forecasts to actual outcomes for 63 countries between 1992 and 2014. Of the 153 recession-years identified, the April consensus forecasts made the previous year predicted a contraction in only 5 cases — on average they pointed to growth of about 3%. Even by October of the recession year itself, 35 of the 153 cases were still missed.
Why do these forecasts miss turning points so badly?
The study points to “forecast smoothing” (Nordhaus, 1987): economists revise their numbers in small increments rather than in jumps, as if absorbing bad news a drop at a time.
In other words: it isn't a lack of data that keeps recessions from being seen coming — it's the difficulty of revising a forecast fast enough to keep up with a sudden turn, whether the forecaster is a private economist or an official institution.
Three caveats, because they matter
- Private forecasters (Consensus Forecasts) and the IMF get it wrong in almost the same way — correlation above 0.9 between their two error series: this isn't a problem specific to one type of institution.
- Accuracy improves slightly after 2008, without becoming good enough to anticipate the recession itself in time.
- The same symmetric failure applies to unexpected booms, missed almost as often as recessions — a sign of a general informational limit, not a reluctance to deliver bad news.
Why it still matters: waiting for economists to signal an “imminent recession” before adjusting your decisions usually means waiting until the recession is already well under way.
For you
- Do you wait for a warning from economists before adjusting your financial decisions?
- What would you do differently if you knew a recession is, on average, only visible once it has already started?
Source: Zidong An, João Tovar Jalles and Prakash Loungani, “How Well Do Economists Forecast Recessions?”, IMF Working Paper WP/18/39, March 2018.
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