Forecasting GDP Growth Considering Crisis Shocks Based on Business Survey Results

Abstract

The article analyzes the short-term effects of aggregate economic sentiment on the expected GDP growth in Russia based on the results of regular large-scale surveys of business activity of the Federal State Statistics Service (Rosstat) for the period 1998–2021. The main purpose of the study is to substantiate the predictive value of the opinions of economic agents in expanding macroeconomic information, especially during crisis periods. The authors aggregate quarterly information for the analyzed period on 18 indicators of surveys with a sample of about 24,000 organizations in basic kinds of economic activity and 5,000 consumers in all Russian regions in a composite economic sentiment indicator (ESI). Then, a statistical analysis of the time series of ESI and GDP growth is carried out, including the identifcation of the integrability order with testing for stationarity and the presence of causality between indicators. The authors prove the possibility of using a vector autoregression (VAR) model with dummy variables to measure the investigated relationship.The forecasting results reflect the interconnection of two time series with the response in the dynamics of the estimated variable (GDP growth) to the reaction of the business environment and the simulation of fluctuations in the ESI dynamics, which are set by the authors and correspond to the expected economic sentiments amid possible crisis changes. Probabilistic estimates of GDP growth until mid-2022 are based on scenario impulses in the ESI dynamics at the 3rd quarter of 2021, which differ in the amplitude and duration of their impact on economic growth, primarily due to coronavirus shocks. According to the results, under all scenarios for the development of business trends introduced by the authors, national economic growth can exceed by the middle of 2022 the pre-pandemic level of the 4th quarter of 2019 (102,9%).