How wrong were we? The accuracy of the Fraser of Allander Institute's forecasts of the Scottish economy since 2000

The Fraser of Allander Institute regularly forecasts the annual growth of the Scottish economy. This paper measures the accuracy of these forecasts. It contrasts official measures of the growth performance of the Scottish economy and FAI forecasts for growth. Specifically, official measures of growth for the calendar years 2001 to 2010 are compared to forecasts for growth in these years made between January 2000 and spring 2011. Results show that: FAI forecasts of the direction of economic growth from one year to the next was statistically better than chance; the accuracy of forecasts improve as we get closer to the publication of the first growth estimate; excluding the „Great Recession‟, the mean absolute error of forecasts made up to eighteen months before publication of the first growth estimate for a year is approximately half a percentage point (i.e. 0.5%). There have often been significant revisions to Scottish GVA data, particularly at the start of the sample period. This emphasises the need for quality, and timely, indicators of economic performance for the Scottish economy as part of the information required for accurate forecasts in the future.