A year ago, the average Argentine economist predicted that inflation between December 2022 and today would be 100%.
How much will it ultimately be this year?
More than double. The consultancy firm Eco Go estimates 218.2% (the December figure is yet to be known, which will be around 30%).
And by 2024?
We know it.
The economist’s own calculations show a significant variation: Inflation can go up or down, give 150% or 350%depending, essentially, on whether the Luis Caputo-Santiago Bausili tandem will be able to avoid what the market sees with concern: a new devaluation in some months of 2024. The year that ends has not been the best for economists and their forecasts at a global level either. At the end of 2022, a survey carried out by The Economist Growth in the world’s largest economy, the United States, is expected to be the fourth lowest in 55 years in 2023. Many expected a recession. The Federal Reserve had raised interest rates in the previous twelve months (ten consecutive increases, bringing them from zero to 5%-5.25%) and Wall Street analysts logically expected a cooling.
But this did not happen. This year the US economy will grow above its potential capacity of 3%, as it has not done since 2005. The last time the Reserve increased the rate this year was in July. And in the meeting a few days ago he mentioned the possibility that three declines will occur in 2024, which have pushed up the returns of the US stock market: its three main indices close the year with a record of nine consecutive weeks of increases, unseen in two decades.
The reason for this market behavior lies in the optimism that the Fed will reduce inflation without the economy entering a recession and that unemployment will increase.
How did economists not predict this? Javier Milei would say.
“They are human” summarized The Economist in its latest issue on economists and their failed predictions in 2023.
This week’s British newspaper Financial Times carried out an interesting exercise: he compared the estimates of a group of experts called superforecaster against their readers. The result showed that the former gave answers in which they guessed less. The growth of the US economy, China, Bitcoin, global inflation, the Women’s World Cup, the Russia-Ukraine war, China-Taiwan and so on.
“The art of superforecasting” began with the work of Philip Tetlock, one of the founders of the Good Judgment company which sells economic, political and defense forecasts, among other areas, around the world.
Tetlock began studying how experts produce geopolitical and economic forecasts when he was a psychology professor at UC Berkeley in 1984. Over the decades, he and his team brought together more than 250 experts from academia, government and the media to make 28,000 predictions.
At first they found out the experts’ predictions were not much better than chance. But over the years and research, they have come to the conclusion that there are three ways to improve accuracy: have more information, reduce bias and the impact of irrelevant variables.
THE geopolitical forecasts have gained strength over the last decade as companies have competed shock from Brexit and the Trump presidency to the war in Ukraine. Famke Krumbmüller, director of EY’s Geostrategic Business Group, told the FT that foresight means adapting strategies to the future.
In 2024 the focus will be on the usual suspects. United States and if Donald Trump returns to power. There will be elections in 70 countries. The risk of China entering deflation and a Second Cold War with Western countries withdrawing their production lines from there. Will inflation around the world finally return to pre-pandemic levels? Everyone hopes so (in the US about 2%).
Here Argentina and Milei will be under the eyes of global markets and companies in early 2024 at the Davos Forum.
What will the superforecasters say about this? For now the only estimate worth its weight in gold is whether inflation in 2024 will be higher (more than 300%) or lower than in 2023 (less than 200%). And remember: the probability of any event in Argentina is zero.
Happy New Year.
Source: Clarin
