The accuracy of inflation forecasts by analysts improved in 2019, while gross domestic product (GDP) forecast went the other way, according to an assessment done by the Department of Finance (DOF).
“Just like last year, we conducted an assessment to see how analysts performed in their inflation forecasts. The results, covering the first seven months of 2019, showed that accuracy, on average, improved,” according to Finance Undersecretary and Chief Economist Gil Beltran. “The average forecast during the first seven months of 2019 was more accurate compared to 2018.”
Beltran said the DOF analyzed the performance of 12 analysts from institutions that regularly announce their forecasts in Manila’s business newspapers.
The 12 institutions are listed from most to least accurate: tied at first place were Rizal Commercial Banking Corp. (RCBC) and Hong Kong Shanghai Banking Corp. (HSBC), followed by Bank of the Philippine Islands (BPI); ING bank; University of Asia & the Pacific (UA&P); Ateneo de Manila University (ADMU); University of Sto. Tomas (UST) and Union Bank of the Philippines (Unionbank), which were tied at 7th place; Moody’s; Security Bank; ANZ Philippines; and De La Salle University (DLSU).
The average difference between forecast and actual inflation in 2018 was 0.28 percentage points (ppt). The difference from actual inflation was reduced to 0.21 ppt in the period covering January to July 2019.
(ranked from most to least accurate in 2019)
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Beltran added that the recently enacted rice tariffication law, which led to retail rice prices falling by as much as P10 per kilo in some areas compared to their peak last year, contributed to the lower inflation environment this year.
Meanwhile, the DOF also assessed the GDP forecast performance of six analysts who regularly announce their forecasts.
The results show that the average difference from actual GDP growth more than doubled from 0.32 in previous years to 0.76 in the first two quarters of 2019.
The six institutions, listed from most to least accurate are: Security Bank; ADMU and Unionbank, tied at second place; BDO-Nomura; DLSU; and UST.
forecast (ranked most to least accurate in 2019)
[table “145” not found /]
“The larger average difference this year can be attributed to the uncertainty caused by the delay in the budget passage and the continued weak performance of agriculture. These factors may have led analysts to overestimate growth,” said Beltran.
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