Analysis of Macro Economic Forecasting Accuracy of South African National Treasury
AbstractThis 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.
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