Difficulties in Economic Forecasting During Pandemic

An Excerpt from Harvard Business Review, May 18, 2020:

"By April 29, the most optimistic forecast among the 28 institutions in our weekly coronavirus survey saw the U.S. economy contracting 8.2%. The most pessimistic projected a huge 65.0% contraction — a spread of 56.8 percentage points — with an average of -31.4%. While most institutions expected a rebound in Q3, some saw further declines. And in Q4, although all economists projected growth of some form, forecasts ranged from a minimum of +1.1% and a maximum of +70.0%. The spreads observed in recent weeks are by far the widest recorded since we started covering the U.S. a decade ago."

Three Reasons Why it is Difficult to Forecast (according to the article):

1. The economic impact and speed of policy changes have never been higher.

2. The pandemic is undermining the reliability of economic data - the bedrock of any good  

    macroeconomic model.

3. The models are diverging so much is because economic forecasters are not familiar with evolution of  

    the coronavirus outbreak in each country.

https://hbr.org/2020/05/why-economic-forecasting-is-so-difficult-in-the-pandemic

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