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Is it true that the European Commission’s economic forecasts are always wrong?

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Pagella Politica, Italy

16 March 2019, Updated: 22 March 2019

Italy’s deputy prime minister and minister of the interior Matteo Salvini, interviewed February 7th by Radio Anch’io on Rai Radio1, commented on the European Commission’s economic forecast published the same day.

The forecast predicts 0.2% GDP growth for Italy, the lowest figure in the European Union. Italy’s government, on the other hand, estimates a 1% growth, or more, after having lowered the initial estimate of 1.5%.

Salvini declared: “I have no interest in talking about those who’ve never got their forecasts right in the last ten years”.

Salvini is correct: in the last ten years, the forecasts on Italian growth released by the European Commission at the start of each year, for GDP growth during the same year, have always turned out to be inaccurate. It should be noted, however, that the Commission’s mistake in seven out of ten cases was too much optimism. But let’s look at the data.

The Commission’s forecasts and the actual figures

In the table below we’ve combined the Commission’s forecasts from the last ten years – available here, up to 2015, and here, for the following years – with the real GDP growth data, demonstrating the differences. On this table from Pagella Politica, the first column displays the real growth number. The second column shows the Commission’s forecast for the year. The difference is shown on the last column.

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The forecasts for each year are those published in February, the “Winter Forecasts”, except for 2009 and 2012 (*), where the only available forecasts were those released in May.

For 2018 (**) the real data on GDP growth is not yet available. We have therefore used the estimate made by Istat at the end of November.

As you can see, ten times out of ten the Commission got it wrong, with a maximum error of 1.4 percentage points in 2012 and a minimum of 0.3 points in 2015-16. The average error for these ten years is 0.66 percentage points.

As expected, the mistake is always too much optimism, apart from three cases: 2010, when the “bounce” after the crisis of 2008/2009 was greater than expected, and in 2015 and 2017, when growth was more robust than predicted.

Conclusion

Salvini is correct that the Commission has never got their economic forecasts right in the last ten years. Two times out of three, however, the Commission’s mistake was to attribute to Italy a GDP growth higher than that actually recorded.

Correction: The English version of this article initially described Matteo Salvini as the vice-president of Italy. His real title is "deputy prime minister of Italy".

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