An economic forecast is an estimate of future economic activity. It is an important tool for businesses as it helps them plan and prepare for changes in the economy, such as increased demand for their products or lower availability of resources. It is also useful for government officials who need to make decisions about spending and taxation policy. In general, it is best to treat economic forecasts with a healthy dose of skepticism.
Forecasts can be created by using a variety of techniques, such as statistical models and mathematical programming. A key element in creating a forecast is the use of historical data, and a model that uses that data to predict the future. The model might take the form of a simple regression analysis, or more sophisticated dynamic stochastic general equilibrium (DSGE) models used by central banks. The model is then tested using the data from a real world economy and the results are published.
The current economic outlook remains subdued, with higher tariffs and policy uncertainty expected to weigh on consumer spending going forward. Consumers’ ability to borrow and spend is constrained by high delinquency rates on credit cards and auto loans. A gradual pickup in global growth, a re-escalation of armed conflict and tightening global financial conditions could dampen economic activity.
The underlying fundamentals of the economy are stable but rising risks have prompted us to downgrade our GDP projections for 2025-26 to 2.7 percent and 2.5 percent for 2026-27. This downgrade reflects the expectation that global trade tensions will escalate, limiting the effect of looser monetary policy, while rising oil prices and debt-servicing costs could limit household purchasing power.