Analysis of Macro Economic Forecasting Accuracy of South African National Treasury

Abstract

This research explores the accuracy of economic forecasts by the Ministry of Finance of South Africa. The Ministry of Finance began to implement economic forecasts in 1997 in the time of Minister Trevor Manuel. These forecasts were presented every year since 1997 in the annual budget speech. The Minister of Finance (Pravin Gordhan) who succeeded Minister Manuel continued to deliver economic forecasts in the annual budget speech since 2010. The research focused on the period 1997 -2009 when Minister Manuel was the ruling political leader of National Treasury, although data for 2010 and beyond is included. A mixed-methods approach was followed to compare the annual forecasts with the actual and official statistics presented by the South African Reserve Bank and the Department of Statistics. Economic forecasts are important for the business sector, the financial sector and the government sector. These forecasts about economic indicators are used by the fiscal authority to provide information regarding the possible outcome of output, revenue and debt for the new budget year. These forecasts can also be used by various institutions for budget purposes, draft of financial contracts and planning of capital projects. Not all institutions can afford to manage a highly technical business unit that delivers economic forecasts run by various mathematical models and post graduate economic employees. The research demonstrated that the Ministerial forecasts for real growth and inflation can be used successfully.

Problems in evaluating accuracy and consistency of macroeconomic forecasts

“…Simionescu (2015) provides a detailed description of the existing indicators for measuring accuracy of forecasts. It is also worth mentioning the prediction-realization diagram that is used to evaluate accuracy of forecasts of the Ministry of Finance of South Africa (see, for example, Mellet, 2014 With so many accuracy measures used by different researches, it is not easy to choose a superior forecasting method or technique. Clearly, there is a need for an algorithm of decision making for selecting the best prediction models by consid-ering several accuracy measures simultaneously.…”

Untitled

“…Цель исследования -определить направления решения вопроса о моделировании и прогнозировании государственного долга в Южной Африке с помощью ARIMA-моделирования. В источниках (Zhuravka et al, 2019;Munir, Mehmood, 2018) (Mellet, 2014), одним из главных инструментов фискальной политики является бюджет как средство изменения любого из фискальных элементов, позволяющий изменить покупательную способность жителей страны. В работе (Cecchetti et al, 2010) авторами показано, что при наличии высокого уровня государственного долга у страны вероятность того, что тот или иной шок вызовет нестабильную динамику долга, возрастает.…”