Bank of England (BoE) Chief Economist Andy Haldane admitted on Thursday that his forecasts on the immediate consequences of the Brexit vote had been too pessimistic, but he linked this to a broader crisis in forecasting as a whole. “We’d foreseen a sharper slowdown in the economy than has happened, in common with almost every other mainstream macro-forecaster,” Haldane said in a livestream conversation organized by the Institute for Government research centre.
He explained that the good performance of Britain’s economy over the past months came as “a surprise” and admitted that his profession had often been wrong in recent years, particularly when it failed to see the 2008 financial crisis coming. It’s true to say that the profession is, to a certain extent, in crisis, he said.
The economist had been asked why the BoE had predicted difficult times ahead for the British economy immediately after the Brexit vote, whereas, in the end, that had not been the case.
Britain’s economy showed great resilience after the referendum on whether to leave the European Union, held in late June, so much so that Gross Domestic Product is expected to top 2% in 2016, even if economists and government officials expect an air bubble in 2017.
“Do we think (the current economic climate) will last? Well, there are reasonable grounds, I would say, for thinking that this year might be a somewhat more difficult year for the consumers than was last year,” Haldane said.
Inflation resulting from the fall of the pound might hurt the purchasing power of households, while businesses are likely to hesitate before recruiting and investing, given the uncertainty surrounding the Brexit negotiations, expected to be launched by March, he explained.