An economic forecast is a prediction of the economy’s performance for some future period, often one or more years. These predictions are important for a wide variety of purposes, including business planning, government budgeting and stock market analysis. The forecaster uses a combination of economic theory, judgment, and mathematical models to make his or her prediction.
Getting a precise measurement of total economic activity is the first step in making a long-range forecast. The economist then estimates how much each part of the economy will grow over a certain period of time, such as consumer spending, government spending and production of durable goods such as automobiles and industrial equipment.
The growth of global economic output is projected to slow markedly this year, owing mainly to rising trade barriers and elevated policy uncertainty. A recovery is expected in 2026-27, but growth remains below potential unless trade tensions are eased and governments make progress on structural reforms. Inflation is projected to decelerate globally except in the United States due to lower oil prices and weaker demand.
The accuracy of an economic forecast depends on the quality of the data inputs and the rigor of the methodology used to construct it. Forecasting errors can be minimized by reviewing the history of similar economic trends and events, obtaining historical data on variables of interest and determining their relationships through statistical analyses such as regression analysis. The use of multiple models is also helpful for improving the accuracy of a forecast.