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IMF Produces Another Bogus Venezuela Inflation Forecast

July 31, 2018 in Economics

By Steve H. Hanke

Steve H. Hanke

The International Monetary Fund (IMF) has done it again. In an
attempt to garner some press, the head of the IMF’s Western
Hemisphere Department Alejandro Werner forecasted that
Venezuela’s annual inflation rate will reach
1,000,000%
by year’s end. By my calculations, this
inflation forecast implies that the exchange rate will reach 923
million VEF/USD by December 2018. To put this into context, the
exchange rate at the end of July was 3.3 million VEF/USD, and at
the end of June it was 3.1 million VEF/USD.

No one has ever been able
to accurately forecast the course or the duration of an episode of
hyperinflation.

The IMF’s most recent inflation forecast is, to put it
mildly, stunning. It is also bogus. No one can forecast the course
or duration of a hyperinflation with any degree of accuracy. Never
mind. The IMF just keeps on making forecasts of Venezuela’s
inflation. And the press keeps on
uncritically reporting
the IMF’s bogus numbers as if they
were credible. The IMF and the press are clearly unaware of the
fact that hyperinflation can be measured, and measured very
accurately, but it cannot be forecasted.

To get a handle on the IMF’s production of bogus forecasts
for Venezuela’s inflation, consider that, during the past
year and a half, the IMF has reported a variety of numbers for the
annual inflation rate in Venezuela. None of the IMF’s numbers
can be replicated. This is a
problem
— one that renders all of the IMF’s
inflation numbers unusable because, among other things, they fail
to pass the scientific smell test. The following is a catalogue of
the IMF’s inflation numbers for Venezuela that have been
reported since September 2016.

  • IMF

    World Economic Outlook
    , October 2017
    • End of 2016 annual inflation rate (Data Source – BCV):
      302.6%
    • End of 2017 annual inflation rate IMF projection: 1,133.0%
    • End of 2018 annual inflation rate IMF projection: 2529.6%
  • IMF

    World Economic Outlook
    , April 2018

    • End of 2017 annual inflation rate: 2,818.4%
    • End of 2018 annual inflation rate IMF projection:
      12,874.6%
    • End of 2019 annual inflation rate IMF projection:
      12,874.6%
  • Until the April 2018 World Economic Outlook (WEO), the
    IMF wrote the same general disclaimer about its Venezuelan numbers
    in each issue of its report:

    Projecting the economic outlook in Venezuela, including
    assessing past and current economic developments as the basis for
    the projections, is complicated by the lack of discussions with the
    authorities (the last Article IV consultation took place in 2004),
    long intervals in receiving data with information gaps, incomplete
    provision of information, and difficulties in interpreting certain
    reported economic indicators in line …read more

    Source: OP-EDS

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