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We're at the global headquarters of the International Monetary Fund in Washington, DC.
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Every six months, the IMF publishes a report called the World Economic Outlook,
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where it gives a forecast for the global economy.
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Forecasts like these are a big undertaking. So how are they made?
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We're going to give you a behind-the- scenes look inside the process.
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We are once again downgrading growth for 2019 to 3%.
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So that's Gita Gopinath, she's the chief economist at the IMF.
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We caught Gita presenting the IMF's World Economic Outlook report to journalists from
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all around the world at the fund's annual meetings in Washington.
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The World Economic Outlook is a nearly 200 page-long report that includes
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hundreds of thousands of data points from 189 member countries of the IMF.
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It's released twice a year and includes economic predictions for the next two years,
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along with thematic chapters that look at big-picture themes like productivity, climate change or technology.
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We are really the only institution that covers literally everybody.
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So how do economists even get to predictions in reports like the World Economic Outlook?
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Let's start at the beginning. First, teams collect data from countries all over world.
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Government agencies measure and report stats like GDP, inflation or trade balances
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this is called “hard data.” There's also “soft data,” which includes surveys of businesses and consumers
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on how they feel about the economic environment now and in the future.
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The IMF's country teams then send this data back to Washington.
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I would say for each country, we're talking one or two thousand data points.
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We collect up to three or four hundred different series for most countries.
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The country teams send us new sets of data approximately 1,500 times every six months.
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So we're looking at a lot of numbers. A lot of data.
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It's not just the big points they look at. GDP, for example,
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helps provide a snapshot of a country's overall economy, but individual gauges are also important.
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For example, oil prices matter a lot for predictions about GDP growth in countries like Saudi Arabia or Venezuela.
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That's because their economies are largely dependent on oil.
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How do you make sure this data is good data, it's not manipulated or wrong?
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We have a whole series of tests and different ways of looking at it.
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Obviously we make sure the numbers actually make sense.
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We do consistency checks to make sure, for example, that the components of GDP actually add up to GDP.
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We look at charts to make numbers appear to be trending in the right direction.
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So once all this data is collected, economists don't just plug it into an equation to generate a prediction.
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They have to consider a lot of other factors, too.
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Where we really try to provide value added is pulling common threads,
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trying to come up with a common story that is not like
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we are just adding up countries and seeing what the global result is.
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The teams here at the IMF start working on their predictions in the months
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leading up to the publication of the World Economic Outlook.
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And they are constantly updating their forecasts as the data evolves.
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It would be nice if we had a process whereby we come to final numbers and then we write the report.
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But the truth is that the report is written as the numbers evolve because we get data releases all the time.
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That still doesn't mean economists get it right.
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In fact, IMF research itself has shown that economists often fail to predict recessions.
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An analysis of 63 countries from 1992 to 2014 found the IMF consistently overestimated GDP growth
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leading up to a recession and only revised growth downwards once the downturn was already happening.
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Other papers have uncovered similar findings.
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Another challenge for economists is translating predictions from wonky data into plain English.
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Normally when you come out of graduate school you start with very technical language but as you
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go along your career, you start realizing you really need to simplify your language
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and boil it down to what it means for individual firms, families, governments.
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So we are walking into a meeting where final preparations are underway
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ahead of the press conference where the World Economic Outlook is released.
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We got a look inside a meeting happening just days before the report was released.
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Economists discussed their findings with select members of the press and
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studied up on the material so that they'd be prepared to answer questions about any country in the report.
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The trick is figuring out how to provide a sensible answer
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to questions on places that people may not know very much about.
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So today's the big day the report is released.
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These are the predictions that everyone has been waiting for and we are going to check it out.
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This year's report found global growth will slow to 3% in 2019,
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that's the lowest level since the 2008-2009 financial crisis.
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A lot of factors affected the IMF's forecast, but some of the biggest included more trade barriers,
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geopolitical uncertainty and aging populations in advanced economies.
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The data is all published online, so that many other economists around the world
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can use it to make their own predictions.
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How do you make sure that the predictions here in the forecast are constantly kind of up to date and relevant?
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You have a lot of questions in the press conference about the news of the day.
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What are you doing to be prepared?
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So, these estimates actually they stay alive.
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At some point we freeze it because it has to be published and put in the document, but
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as of now we have these numbers constantly being updated.
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Even after the findings are presented at the IMF's press conference,
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they're highlighted throughout the next days and months by IMF officials and other world leaders.
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The world economy is slowing down, we are in a synchronized slowdown.
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So you might think that after this is all done, economists can take a breather for a little bit.
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But it turns out, they're already working on the economic outlook for next year.
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We actually start thinking about the next one even before we publish the forecast.
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Hey everyone, it's Elizabeth, thanks so much for watching our video.
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What do you think about the making of the World Economic Outlook? Let us know in the comments.
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And you can always leave us other ideas there too. See you later.