The reliability of public debt forecasts by Julia Estefania Flores, Davide Furceri, Siddharth Kothari, Jonathan D. Ostry published by VOXEU (5/2021).
Public debt ratios have increased significantly in 2020 from already elevated levels. Current projections envisage a quick stabilisation and subsequent decline in debt ratios. This column assesses the likelihood of this projection by looking at past evidence on forecast accuracy, based on a new comprehensive dataset of medium-term debt forecasts. It finds that forecasts have systematically understated the actual evolution of debt. If the past is a guide to the future, rather than declining, debt ratios could be some 7% of GDP higher five years from now than they are today in emerging and developing countries.
