# **Table 1 Projected and Actual Real GDP Growth Rates for Developing and High-Income OECD**

# **Countries, 1965–2000**

<u>(annual percentage change)</u>

||_Historical_<br>_annual g_|_average_<br>_rowth _|_Projecti_<br>_199_|_on for_<br>_0s_||_Forecast_<br>_(perce_|_error_<sup>_a_</sup><br>_nt)_|
|---|---|---|---|---|---|---|---|
|_Income level_|_1965–88_|_1980s_|_Baseline_|_Low_<br>_case_|_Actual_<br>_(1990–_<br>_2000)_|_Baseline_|_Low_<br>_case_|
|All low- and middle-income<br>countries|5.2|4.3|5.1|4.3|4.9|–4.2|13.6|
|All low- and middle-income<br>countries except China and<br>India|4.8|2.8|4.5|3.8|3.7|–18.0|–2.9|
|High-income OECD<br>Countries|3.1|2.8|3.0|2.6|2.5|–15.6|—2.7|

_Source_ : All data except actual data and forecast error are from Fardoust and Dhareshwar 1990. Data for 1990–2000 are from World Development Indicators.

_Note_ : The country coverage for the actual data is slightly different from the coverage for the projections. It excludes Myanmar and Taiwan, China, data for which were not available. Instead of Yugoslavia, the GDP data for Croatia, Macedonia, Serbia, and Slovenia are used; data were not available for Bosnia-Herzegovina, Kosovo, or Montenegro.

> a Calculated (using unrounded values) as [( _ya – yf_ )/ _yf_ ]*100, where _ya_ is the actual growth for the 1990s and _yf_ is the growth for the 1990s forecast in 1989.

# **Box 1 The Forecast Process at the World Bank in the Late 1980s and 1990s**

Box figure 1.1 shows a skeletal view of the annual forecast process at the World Bank in the 1990s and early 2000s. The cycle begins with the formulation of planning assumptions—projections of variables characterizing the external economic environment for developing countries over a 10-year horizon. These variables include growth and inflation in high-income OECD countries; real and nominal international interest rates; aggregate global trade; and prices of energy, major nonenergy commodities, and manufactures (the “MUV index”). The Bank does not forecast exchange rates. Instead, it makes the technical assumption that real exchange rates of major currencies remain the same as their values at the beginning of the forecast period.

The Development Prospects Group (DECPG) (earlier the Economic Analysis and Prospects Division [IECAP]) proposed draft projections of these variables, based on in-house models; projections by various external agencies (including the IMF, the OECD, and the LINK Project, as well as consensus forecasts); and a judgmental reading of the global economy. The draft projections were reviewed and discussed by the Planning Assumptions Committee (PAC), which consisted of representatives from the Development Economics Vice Presidency (VPDEC) and the chief economists of regions, the International Finance Corporation (IFC), and other parts of the Bank.

The Bank thus did not have a single grand unified model of the world economy. It used a suite of models for energy, nonoil commodities, and capital flows as well as models for a large number of individual economies. The country models are not meant to be used to generate primary baseline forecasts (except in the case of a few countries in which forecasts by country desks are not available). They were used mainly 13