School of Economics and Finance

March 2016

The table below presents the one year ahead forecasts for quarterly (annualised) GDP growth and RPI inflation estimated using data upto Q4-2015. The forecasts are an average of the projection for the four quarters of 2016. The forecasts are derived using 15 econometric models. 

The aim is to provide a wide ranging statistical outlook for the UK economy that is largely free from conditioning assumptions and judgement. 

Details on the models and forecasts can be found at: http://cremfi.econ.qmul.ac.uk/efp/index.php

Forecast summary and key highlights for 2017 can be found here.

Key Highlights:

  • UK RGDP is expected to grow by 2.17% in 2016. However, the forecast variance is 0.51 across models.

  • UK Inflation is expected to be 1.79% in 2016. However, the forecast variance is 0.90 across models.

  • In comparison, UK Treasury Independent Consensus Forecasts are 2.1% and 2.1% for UK RGDP and Inflation.

  RGDP Growth Inflation
  Mean Dispersion Mean Dispersion
Autoregr. Moving Average 2.06 [-1.6 - 5.8] 2.81 [-6.7 - 12.5]
TVP Factor Augmented VAR 2.18 [-3.6 - 8] 1.84 [-3.9 - 7.5]
Bayesian VAR 2.55 [-0.4 - 5.5] 1.72 [-5.5 - 9]
Fin. Threshold VAR 2.79 [0 - 5.6] 1.86 [-5.1 - 8.8]
Large Bayesian VAR 2.01 [-0.7 - 4.7] 2.01 [-4.8 - 8.8]
Fin. Smooth Transition VAR 2.20 [-0.4 - 4.9] 0.29 [-6.7 - 7.4]
Threshold VAR 2.69 [-0.3 - 5.7] 1.16 [-6.1 - 8.5]
Smooth Transition VAR 2.99 [0 - 6] 3.95 [-3.7 - 11.5]
DSGE -0.10 [-24.2 - 23.7] -0.07 [-10.7 - 10.6]
TVP VAR 2.43 [0.1 - 4.7] 1.74 [-1.1 - 4.6]
Markov Switching VAR 2.28 [0.3 - 4.2] 2.46 [-2.1 - 7]
Mixed Frequency VAR 1.64 [-2.1 - 5.4] 1.54 [-4.3 - 7.5]
Unobserved Component SV 1.96 [-0.4 - 4.5] 1.50 [-2.1 - 5]
BVAR Common SV 2.35 [0.8 - 3.9] 2.12 [-0.8 - 5.1]
BVAR t Disturbances 2.52 [0.1 - 5] 1.88 [-3.3 - 7]
Average 2.17   1.79  
Highest 2.99   3.95  
Lowest -0.10   -0.07  
Variance 0.51   0.90  
Average: Average of forecasts across Cremfi Forecast. Project Models
Dispersion: 10% - 90% Quantiles of Forecast Distribution. TVP: Time Varying Parameter,
DSGE: Dynamic Stochastic General Equilibrium, VAR: Vector Autoregressive, SV: Stochastic Volatility