Tan Kin Lian's Blog: Economist and forecast

Monday, November 09, 2009

Economist and forecast

MM Lee had forecasted the economic growth to be 3% in 2010. A blogger commented that MM is not an economist and questioned how MM got his figures.

I am not an economist myself, but I will also make my own guess. Those who don't like my guess are free to ignore it. They are not required to challenge me.

I never knew that economic forecasting is the purview of economists and that other lesser mortals are not allowed to venture their guess. I am told that if you meet 20 economists, you are likely to get 40 forecasts and most of them are likely to be wrong. So why should this privilege of guessing wrongly belong only to certain people?

Albert Einstein once met a person with an IQ of 160. They discussed quantum physics. He later met someone with an IQ of 110. They discussed engineering. Then, he met someone with an IQ of 70. Einstein asked him, "what is the economic growth likely to be for next year?"

So, here is my guess. Economic growth for 2010 will be 0% to 2%. My guess is lower than MM. Why? I think that the stimulus would have run out and that people will realize that the underlying problems of the global economic system is quite serious. If I am wrong - attribute it to my IQ of 70.

Tan Kin Lian

28 comments:

Anonymous said...: My dog,dunno what is his IQ , but he predicts that the GDP growth will be 3% and this happens to be the same as MM.; November 09, 2009 8:08 PM
Anonymous said...: i think you should not insult the economist, i being one.; November 09, 2009 8:14 PM
Anonymous said...: I didnt know you knew Einstein!!; November 09, 2009 8:46 PM
thefisherman said...: I thought it's anybody's guess as economic forecasting is no better than fortune teller trying to predict the future.
Economist is making forecasting because people want to talk about it, not because economist knows about it.
Do not comment as anonymous, it's worse than omitted; November 09, 2009 9:16 PM
Steve Wu said...: Kin Lian,

There is a difference. When the MM predicts the growth at 3% in 2010, most people will assume that he is announcing an official statement after expending the resources at the MTI and/or MOF to arrive at this conclusion. There is a stronger requirement/expectation to be correct.

If this were NOT the case, he should have been careful to state that is his personal view. No one shall fault him in this instance, even if it is his gut feeling or indeed he has plucked the numbers from thin air.; November 09, 2009 9:38 PM
Anonymous said...: remember SAR,he said will be bad for 4to5 years then,bounce aggressievely around 2006,2007 then he proclaim 'golden period' then come 2008,then GIC; Temasek lost huge then 2nd half bounce back in 2009,what prediction?! sing song lar, i can also predict BUT if is reversed?blame it to other source or circumstances..aiyah really wanyang in Singapore lar..big economy dot talk so much, just work & do it, here he can say anythoing & if rite, hs credit & wrong?honest mistake lar..i think we all better go eat banana with him lar...BTW, m the great economist & i say, NO GROWTH!; November 09, 2009 10:07 PM
Anonymous said...: There's no right or wrong, it's just a prediction. It's up to you to believe or not to believe, the choice is yours.; November 09, 2009 10:23 PM
Anonymous said...: You are reading too much into what MM says. He also said oil will not exceed US$110 last year but it hit US$147.

Just take it as another input which generally means that 2010 will be better than 2009.

Bear in mind that more good news will be coming our way as election is drawing near. Hopefully one of the good news is the MB investors suffered a lesser lost after valuation......As for PAP, I still think the cabinet is grossly overpaid while the rest of the working population is asked to work hard on CBF....A good joke for 2009.; November 10, 2009 12:07 AM
Anonymous said...: Remember who was saying Singapore was going through a golden era some 18 months ago?; November 10, 2009 12:17 AM
Anonymous said...: previous posting, you said people should be positive. now you were looks negative with your forcast. hope for good and try our best to achieve.; November 10, 2009 1:19 AM
Tan Kin Lian said...: To 8:14 PM

I meant no insult to economist (IQ above 110).

But there are some activities that people with IQ of 70 can do as well, such as forecasting the economy, picking stocks, deciding when to buy or sell, running the country, etc. It is not confined to high IQ people.; November 10, 2009 5:22 AM
Anonymous said...: 3% growth appears to be on the conservative side. If you have a policy which includes the population by about 5% a year, it is hard for the economy not to grow. My guess is that BECAUSE of the FT policy, our population will grow by about 5%. As such, GDP growth for 2010 will be about between 3% to 5%.

This GDP growth number is however quite meaningless to the man on the street as the large numbers of FT will tend to depress wages.; November 10, 2009 8:35 AM
Anonymous said...: You need only an IQ of 50 to pick winning stocks and better stocks than those fund managers.; November 10, 2009 8:52 AM
Anonymous said...: IQ doesn't define a person. Not because of having high IQ directly means shall be given privileges and whatever BS said shall be listened and believed.; November 10, 2009 9:20 AM
C H Yak said...: Such economic forecast or/even economic data officially published here on Singapore should be taken with a pinch of salt. It is just a "ball" parked figure.

The issue is some chooses to interpret it as if the MM is an economic guru. We need not interpret it as if it was a signal by Soros to invest in a company like BYD, or whatever.

I think he knows Singapore's growth will not climb back to 6% and above(which would be Golden Egg, not Golden Period), so he took the "half way point" which is 3%.

Economists make forecasts and projections. Statisticians just publish such forecasts with more datas.

Politicians will use them with nicer words to suit their own purposes, particularly to justify or defend their own actions. If the actual deviates from prediction, they will know how to explain why it was higher or lower. If cannot explain then call the statistician to come up with more data.

If there is a need for elections or ask for higher pay, then project higher and say "Golden Period". They want it longer to prolong their rule then say "Golden Era". If they lose a lot in investments, they just say they failed in the "Golden Opportunities" because of external factors beyond their control, etc.

Anyway, such predictions by him is not going to influence our stock market to perform any better or fall. It is better to look at more major external indicators like US employment statistics. At least, such statistics may earn us a small token in real soild "Gold" even if they had been "massaged".

If I do want to use such projections, I better "discount" it. The lower limit is always where you are now. The upper limit can be taken by applying 80:20. If I choose to take the MM as Guru I will take 80% of 3 = 2.4%. If I prefer Mr Tan as Guru, I better take 1.6%. If I am wrong, I still can attribute it to Mr Tan's IQ of only 70; because mine may be just 80% of 70, HaHaHa.; November 10, 2009 10:37 AM
Anonymous said...: I share the same view as Mr Tan, generally I am not expecting much in economic growth next year, as there is still too much underlying problems not solved in the bigger economies, ie US, Euro zone, Japan.....

The govererment has been saying that there will be no double dip drop scenrio and for MM to say that next yr. it will grow by 3% to me is giving "false" hope to the people.... and the people will "relax".. and maybe caught out, again! So what MM says is "vital".

I do hope I am wrong in my view, just "pray" that China... can get its people to spend their savings domestically.... Soon!!; November 10, 2009 10:52 AM
Anonymous said...: Here's a joke about economic forecasting:

3 economists interviewed for the job of economic forecasting.

Interviewer: What is 1 + 1?
1st economist: "2"
Interviewer: very good. I'll let you know later if you have been successful.

Then the 2nd economist went into the room for his interview.

Interviewer: What is 1 + 1?
2nd economist: "3". A good economist will always be able to synergise the economic inputs so that the whole is greater than the sum of its parts.
Interviewer: very good. You show great promise. I'll let you know later if you have been successful.

Now it's the turn of the 3rd economist.

Interviewer: What is 1 + 1?
3rd economist: "What do you want it to be?".

Interviewer: Very good. You display the necessary political acumen needed to perform complex economic forecasting for our country. You are hired! Congratualations!; November 10, 2009 11:58 AM
Vincent Sear said...: L.K.Y. doesn't forecast economic figures. He consults with his economists, analysts etc. first, then he make the speech.

Anyway, on a personal level, economic growth, employment and retrenchment figures are meaningless as long as you still have your job and salary. These are also helpless but figures if you lose your and salary.; November 10, 2009 12:16 PM
Anonymous said...: During 2008, everyboy and their pets predicted doom & gloom for 2009.

Look how that turned out. Everything from Property to Equity to Commodity to Restaurants is BOOMING!!; November 10, 2009 12:56 PM
Anonymous said...: Dear Mr Tan
I'm writing to protest about annonymous (9 Nov, 8.08pm) who mentions his dog in the same sentence as economic forecasts about GDP growth.

This is a highly demeaning association and very unfair to the dog.; November 10, 2009 1:00 PM
Anonymous said...: REX laughs (Nov 10 @ 1 pm)

The joke is very good. I had a good laugh!!!

REX; November 10, 2009 3:12 PM
Anonymous said...: Talk is cheap but sometimes it's good to talk less, less talk, less mistake.

Why you appear more than your son in the news lately just bcos you're getting old, so better talk more now since not much "time" left?; November 10, 2009 5:06 PM
Anonymous said...: The Singapore economy is fine.
Look no further:

property prices-up
stock market-up
coe prices -up
restuarant bookings -up
weddings -up
ERP rates- up
fuel prices-up
semcorp earnings- up
DBS earnings-up
computer fair sales -up
NATAS travel fair sales-up
convention bookings-up

Live and enjoy, deny the doomsayers; November 10, 2009 10:02 PM
Anonymous said...: Economist and politician are the sama sama ! They sail with the winds.
their prediction always end with a "BUT"; November 11, 2009 1:18 AM
Anonymous said...: My dog is also a financial economist.
He uses all available indicators like the broad GDP indicator to predict market direction. Really he is spot on.; November 11, 2009 1:28 PM
Vincent Sear said...: I'd have to agree with Anonymous 10:02PM. It' s joke. Hahaha!!! Please people, take care of yourselves. Relying on government is a joke and a very risky joke.

In fact, I wish the government doesn't try to take care of me. It always comes with extra costs. I'm fine taking of myself. If I die, I'm simply dead. Why's the government worrying about? I'm not the one complaining evening though I'm the one dying.

The government is here to make profits, I have no illiusion about that. There's no such thing as public service, otherwise they won't demand millions in salaries. I have no problem abou too.

Take your mercenary money but please do your job. Even mercenary have honours to maintain. You too?; November 11, 2009 1:52 PM
Anonymous said...: Vincent ,
you talk about mercenary. Aren't insurance agents mercenaries of the worst kind? No proper job done for their clients but burden of high premium from rip off wholelife products.; November 11, 2009 3:17 PM
Vincent Sear said...: To Anonymous 3:17PM:

My position has been stated and restated several times through these debates and even rantings.

I agree that there're unethical and incompetent agents. However, there're also ethical and competent agents. That's my position. You may disagree and stop buying insurance or dealing have any dealings with insurance agents. That's your prerogative.; November 11, 2009 8:55 PM