An economic forecast is a statement of expected economic activity. It may refer to gross domestic product (a measure of the total value of goods and services produced in a country) or to more specific categories of economic activity. The forecast is normally given for a period that extends several years beyond the usual short-term forecast periods used in business planning and financing decisions.
The most familiar of all economic forecasts is that of the gross domestic product or GDP. This is the measure of the total value of the goods and services produced in a nation; it is a convenient general economic indicator that can be calculated from a wide range of individual economic data points. The forecasts of GDP growth that are provided by the national statistical agencies of most developed countries are widely used and are a significant factor in shaping policy discussions.
In general, long-range forecasts are based on the assumption that economic activity toward the end of the forecast period will reflect normal full employment. They are also often influenced by the assumption that the rate of productivity growth will be consistent with past trends. The forecasters may also be guided by a number of other considerations. These include population pressures that lead to lower consumer spending, higher tax rates or reduced government spending, and technological developments that will increase the capacity of firms to produce more with less labor.
Methodologies for making economic forecasts are highly varied. Some of them depend on a statistical characterization of the variable to be predicted; such methods are generally employed where the person making the forecast lacks the time or interest to attempt a detailed study of why that variable behaves as it does.