01 Dec How Inaccurate Are the Economic Growth Forecasts in Bolivia’s General State Budget?
One of the few positive aspects of a crisis is that people start paying attention to economic variables that, until a few years ago, they didn’t care about. Indeed, many of our fellow citizens now know what the exchange rate is, the Central Bank reserves, inflation rate, devaluation, subsidies, and recently, the General State Budget (PGE).
In recent days, the PGE for 2025 was published, and among its many variables, one always stands out: the expected GDP growth rate for the following year. A quick online search reveals that this forecast for 2025 is 3.51%. This naturally raises a question: historically, how accurate have the GDP growth forecasts in the PGE been?
The quick answer is: always wrong. Let me show you why.
The following table presents observed growth, the PGE forecast, and the difference between the two. It becomes clear that the forecast has (generally) been higher than the actual outcome. For example, in 2023, a growth rate of 4.86% was forecasted, but the actual result was 3.08%.
Observed vs. Forecasted GDP Growth and the Difference
In fact, it seems that the lower the economic growth (heading toward a crisis), the more optimistic the PGE forecasters become. The following figure shows that the lower the observed growth rates, the greater the discrepancy with the forecast. Simply put: in tough times, we deceive ourselves into thinking things will be better.
To conclude, the 2025 PGE growth forecast is the lowest in recent years, which, sadly, is still overly optimistic.
There will come a time when the PGE will be a real economic policy tool and not just a mere formality… much like how an ID photocopy is treated today.
Abrazo!
S. Mauricio Medinaceli M.
December 1st, 2024
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