Eleven Negative Surprises in the Euro Area

April 6, 2015

In 11 cases, the European Economic Forecasts from February 2014 had anticipated higher growth rates for euro area members than actually materialized. Although last year's GDP data is still either estimated or provisional for five euro area economies (Cyprus, Portugal, Greece, Spain, and the Netherlands), several surprises stand out: Italy, Austria, and Latvia all failed to achieve their expected growth by 1 percentage point or more. The most positive surprises were Slovenia and Ireland, both of which exceeded their predicted growth rates by more than 2.5 percentage points.

In those cases when the EU Commission forecasts overshot, the average mistake was 0.6 percentage points. In the instances where economies outperformed expectations, the average mistake was 1.3 percentage points. Giving equal weight to positive and negative surprises, the average forecasting mistake was about 0.9 percentage points.

Last year's prediction for the euro area as a whole was among the more accurate forecasts, but it still fell short—the euro area expanded by 0.9 percent in 2014 in real terms, missing the original prognosis by nearly half a percentage point.