How good ( or bad ) are country projections?

World Bank economists routinely undertake projections of national accounts and balance of payments for their countries. These appear as part of the Bank's Country Strategy Papers. This note examines projections done during the 1983 - 85 period, and compares the projected levels of GDP, imports, exports, terms of trade, savings and investment with the actual outcome for the same period. The principal conclusions are as follows : 1) gross domestic product (GDP) projections tended to be optimistic; 2) projected export volumes tended to be slightly lower than the actual outcome; 3) the actual terms of trade deterioration was somewhat worse than expected (with extremely wide variations among countries); 4) investment and savings rates were both slightly overestimated (with significant variation among countries); 5) on a regional basis, projections of GDP growth in African countries had the greatest overestimation; 6) resource gaps, or capital inflows were about what was expected; and 7) investment efficiency was much worse than expected. The liklihood of wide variations between projections and actual events suggests that the use of these projections for judgements about creditworthiness and country risk could be misleading. Not only are improvements needed in country modeling, but equally important are improvements in the forecasts of external environment facing developing countries.