Uncertain times, unreliable prophets

There hasn’t been a time in recent memory when planning for the short- to medium-term had been as difficult as it is now. As an economist often asked by groups and firms to speak on the economic outlook on which to plan their organizations’ way forward, about the only thing definite I could say about the near future is that things are indefinite. Forecasting has never been a precise science, more so with economic forecasting, where we economists invariably make it a “two-handed” exercise (weather forecasters at least have their satellite photos). That is, it entails saying “on one hand…” and “on the other hand…” to describe the same thing, which to some, amounts to saying nothing. That’s why there’s the joke that the hardest thing to find in the world is a one-armed (or at least one-handed) economist.

Economists tend to be masters at finessing that, of course. Take how the formidable International Monetary Fund describes the short-term prospects for the world economy, in its latest World Economic Outlook: “Economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies….” Yet in the very next bullet, it says: “Growth prospects have marginally worsened for emerging market and developing economies…” and “the balance of risks is viewed as being to the downside.” Not exactly a great way to inspire confidence in our craft, I’m afraid.

One wonders if those bullets were written by two different economists (they’re a dime a dozen at IMF, after all), or by yet another two-handed economist whose right hand doesn’t know what the left hand is doing (or, in this case, saying). Which is probably why economists, along with lawyers, have what could well be the two most maligned professions on the planet. Like lawyers who can as convincingly argue either of the two opposing sides to any particular case, depending on who is paying, economists can either be “prophets of doom” or “prophets of boom.” At least for us economists, the difference is usually a question of opinion, rather than one of compensation—with due apologies to my many lawyer friends.

If economic analysts have become even less definitive about their forecasts these days, you can blame it on what I call “tectonic shifts” that the world has seen of late. The first major one was, of course, “Brexit,” or the fateful vote last June by Britons to separate from the European Union. Economic analysts had a heyday shortly after, predicting that the British economy would soon grind to a halt. Well, it didn’t quite happen that way—or at least not yet. The respected British paper The Guardian recently noted how, for various reasons, the British economy saw “a strong finish to the year, defying earlier forecasts from the Bank of England and others that the economy would grind to a standstill.” This is not to say that Brexit will not harm the British. It will, and it already has, to some extent—and this I can say definitively (but it would take another column to explain why).

The more recent, and bigger, tectonic shift is the ascension to the US presidency by Donald J. Trump. It’s hard enough to predict what alarming statement he will make next (just like someone we Filipinos all know—more on this below). On the economic front, he is preaching policy that exactly runs counter to what he is known to have practiced as a businessman (I mentioned last Tuesday my “Donald J. Trump Collection” blazer that bears the tag “Made in China”). This makes it especially hard to anticipate whether he would indeed make good on his campaign promises, with all the dire consequences most analysts believe they would bring. Even harder to predict perhaps is his own political future as US president. And here at home, we’ve had our own tectonic shift, albeit at a much smaller scale, and there’s hardly any need to elaborate. Whether because of Britain’s bravado, Trump’s triumph, or President Duterte’s diatribes, as many of my business friends are wont to saying these days that we live in uncertain times.

Taken all together, perhaps we economists shouldn’t be faulted if we prove to be somewhat less reliable prophets, at least in the near future.

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