30/12/16: In IMF's Forecasts, Happiness is Always Around the Corner

Remember the promises of the imminent global growth recovery 'next year'? IMF, the leading light of exuberant growth expectations has been at this game for some years now. And every time, turning the calendar resets the fabled 'growth recovery' out another 12 months.

Well, here's a simple view of the extent to which the IMF has missed the boat called Realism and jumped onboard the boat called Hope

Table above posts cumulative 2010-2016 real GDP growth that was forecast by the IMF back in September 2011, against what the Fund now anticipates / estimates as of October 2016. The sea of red marks all the countries for which IMF's forecasts have been wildly on an optimistic side. Green marks the lonely four cases, including tax arbitrage-driven GDPs of Ireland and Luxembourg, where IMF forecasts turned out to be too conservative. German gap is minor in size - in fact, it is not even statistically different from zero. But Maltese one is a bit of an issue. Maltese economy has been growing fast in recent years, prompting the IMF to warn the Government this year that its banking sector is starting to get overexposed to construction sector, and its construction sector is becoming a bit of a bubble, and that all of this is too closely linked to Government spending and investment boom that cannot be sustained. Oh, and then there are inflows of labour from abroad to sustain all of this growth. Remember Ireland ca 2005-2006? Yep, Malta is a slightly milder version.

Notice the large negative gaps: Greece at -21 percentage points, Cyprus at -18 percentage points, Finland at -15 percentage points and so on... the bird-eye's view of the IMF's horrific errors is:

• Two 'programme' countries - where the IMF is one of the economic policy 'masters', so at the very least it should have known what was happening on the ground; and 
• IMF's sheer incomprehension of economic drivers for growth in the case of Finland, which, until the recession hit it, was the darling of IMF's 'competitiveness leaders board'.  

Median-average miss is between 4.33 and 4.97 percentage points in cumulative growth undershoot over 7 years, compared to IMF end-of-2011 projections.

So next time the Fund starts issuing 'happiness is just around the corner' updates, and anchoring them to the 'convincing' view of 'competitiveness' and 'structural drivers' stuff, take them with a grain of salt.

15/5/2013: Straight from 1984... The Department of Stabilisation...

Fir the fun of reading between the lines, follow my italics:

"IMF Executive Board Approves €1 Billion Arrangement Under Extended Fund Facility for Cyprus

The Executive Board of the International Monetary Fund (IMF) today approved a three-year SDR 891 million (about €1 billion, or US$1.33 billion; 563 percent of the country’s quota) arrangement under the Extended Fund Facility  (EFF) for Cyprus in support of the authorities’ economic adjustment program. [Given that Greece has more than double time to 'repay' its 'facilities' and Cyprus is likely to face an economic collapse worse than that experienced in Greece, good luck betting on that 3-year window not staying open less than a decade] The approval allows for the immediate disbursement of SDR 74.25 million (about €86 million, or US$110.7 million).

The EFF arrangement is part of a combined financing package with the European Stability Mechanism (ESM) amounting to €10 billion. It is intended to stabilize the country’s financial system [completely destabilised by the Troika arranging 'stabilisation' of the Greek economy], achieve fiscal sustainability [by pushing the GDP down by close to 13% in 2013 and likely another 15% by the end of the 'stabilisation' period], and support the recovery of economic activity [devastated by the Greek 'rescue' by the Troika and botched 'rescue' of Cyprus] to preserve the welfare of the population [who now need welfare as their jobs and savings are being vaporised by the economic 'stabilisation' measures of the Troika]."