This year, the ESADE Target an instrument that analyses the accuracy of the economic growth and unemployment forecasts made by leading institutions over the past three years – found that Axesor and Repsol were the institutions that most accurately predicted Spain’s economic growth in 2017. The 2.6% figure published by both institutions was the closest to Spain’s real growth in 2017 (3.1%) of any of the institutions studied. The next most accurate forecasts were published by the European Commission and Bankia, which both predicted 2.5% growth for Spain. The average error for all the organisations studied (0.8%) was twice as large as the previous year (in 2016, the average forecast was 2.8% GDP growth, compared with a real figure of 3.2%).

The gap between the forecasts and reality is even more pronounced in the ESADE Employment Target: the average prediction (18.3%) was nearly two percentage points higher than Spain’s real unemployment figure for 2017 (16.5%). The Economic Forecasting Centre of the Autonomous University of Madrid (CEPEDRE) and the Bank of Spain were the least accurate unemployment forecasters, publishing figures of 19.6% and 18.9%, respectively. Both entities predicted that unemployment in 2017 would be higher than the 2016 figure of 18.6%.

Economic Target

Although the average error this year was nearly one percentage point, some institutions published fairly accurate predictions of Spain’s GDP growth for 2017. In fact, the accuracy of some institutions increased sharply with respect to last year’s forecasts. The clearest example is the European Commission, which, with a forecast of 2.5%, moved up 14 spots in the ranking of the most accurate forecasters, from #17 to #3. Similarly, Caixabank’s forecast of 2.4% allowed it to move up 12 positions to #4.

In this edition of the ESADE Target the forecasting unit of Banco Santander fell sharply in the ranking, from #5 to #17, due to their GDP growth forecast of 2.2%. Similarly, the Flores de Lemus Institute fell 14 places, due to its prediction of 2.1%. Intermoney, ranked #1 in 2016, also fell sharply to #21, the second-to-last spot in the ranking. The few institutions that maintained the same position as in last year’s ranking include Repsol, holding steady in the #1 spot, and CEPREDE, once again occupying the lowest rung of the ranking.

The 2017 ESADE Target, which calculates each institution’s average deviation over the past three years, shows various changes with respect to last year’s edition. Due to the difference in accuracy exhibited by most of the institutions, Banco Santander emerged as the most accurate forecaster this year, with a three-year accumulated deviation of 0.63%. In second place is the Bank of Spain, followed by Repsol, which, despite leading the list for two years running, has a three-year accumulated deviation of 0.77%. Likewise, despite considerable improvements in their predictions this year, the Spanish Government and the European Commission remain in the outermost rings of the Target.

Europe Target

The average eurozone growth forecast this year was 1.5%, a full 1.2% lower than the real GDP growth figure for the region in 2017 (2.7%). The forecasts for the European Union’s largest economies – Germany, France, Italy and the United Kingdom – were similarly off the mark, with the institutions predicting, on average, GDP growth of 1.2%, whereas the real average figure for these four countries in 2017 was 2.1%. For the eurozone, as well as for the individual countries studied, the most accurate forecasters were the European Commission and BBVA.

The country that proved most difficult to forecast was Germany, which saw 2.9% growth in 2017; on average, the predictions for this country were off the mark by 1.3%, on average. The United Kingdom, which saw 1.5% growth, was somewhat less difficult to predict, with an average deviation of 0.4%. The institutions were very cautious in their forecasts, especially with regard to Germany and France. Unlike the other targets, the Europe Target saw no major changes at the top of its ranking, given that the European Commission, BBVA and the International Monetary Fund have spent several years jockeying for the #1 spot.

Employment Target

The unexpected drop in unemployment in 2017 took the institutions by surprise. Although most forecasters expected unemployment to remain steady at its 2016 rate (18.5%), it ultimately fell, as in the previous year, by nearly two percentage points. As a consequence, the average deviation for the 2017 Employment Target was once again nearly two percentage points (1.8%). Even the Spanish Confederation of Employers’ Organisations (CEOE) – the entity that came closest to predicting the real figure published in last year’s fourth-quarter Economically Active Population Survey – was more than a percentage point off in its forecast.

Besides the CEOE, the institutions that came closest – relatively speaking – to predicting Spain’s 2017 unemployment rate were Analistas Financieros Internacionales (AFI) and the Institute of Economic Studies. These two entities were also the ones that moved up the most in the ranking, with the former climbing 15 positions and the latter 12. The Spanish Government fell one position, from #1 to #2, but like Banco Santander remains one of the top-ranked institutions. The most pessimistic forecasters were the Bank of Spain and CEPREDE, whose predictions – 18.9% and 19.6% unemployment, respectively – show that they expected Spain’s unemployment rate to grow with respect to its 2016 figure of 18.5%.

In the 2017 Employment Target, the institutions whose accuracy has increased over the past three years consolidated their position as reliable forecasters. These institutions are led by the CEOE, which has an average three-year deviation of 1.46%, followed by the Spanish Government and the Centre for Economic Studies of Madrid at Rey Juan Carlos University (CEEM-URJC), with cumulative average deviations of 1.62% and 1.66%, respectively. The institutions that saw their accuracy decrease this year were Caixabank and the Bank of Spain, with cumulative average deviations of 2.16% and 2.65%, respectively. All other institutions assessed by the Employment Target remained in the same range as last year.

Employment/GDP elasticity for 2017

For the third year in a row, the ESADE Target presents the percentage variation for unemployment divided by the percentage variation for GDP for each institution’s forecast – in other words, the elasticity of employment with respect to economic growth. In this year’s edition of the Target, the analyses of practically all institutions reflect increased sensitivity of employment to economic growth. The real elasticity for 2017 (0.85) was below the average forecast of (0.90) but higher than the real figure for 2016 (0.72).