POLICY PAPER N2024/03 - A NOVEL HYBRID FORECASTING MODEL FOR GEORGIAN GDP

Specifically, the first smoothing equation represents the level, the second the trend, and the third the seasonal component. [...] In the model with exogenous variables, the average forecasts depart from the real data by 0.24% in the third quarter of 2022, 1.22% in the fourth quarter of 2022, 2.22% in the first quarter of 2023, and 4.44% in the second quarter of 2023. [...] In the absence of exogenous factors, the average forecasts differ from the real data by 0.78% in the third quarter of 2022, 0.84% in the fourth quarter of 2022, 0.86% in the first quarter of 2023, and 4.24% in the second quarter of 2023. [...] The GDP growth rates estimated using the new hybrid model deviate from the real data by just 0.06% in the third quarter of 2022, 1.09% in the fourth quarter of 2022, and 1.91% in the first quarter of 2023.2 The projections from the previous ISET model, on the other hand, indicate considerably greater deviations from real data, with absolute percentage errors of 6.13% in the third quarter of 2022,. [...] Specifically, the old model overestimated the official GDP growth rate by 6.13% in the third quarter of 2022, 2.03% in the fourth quarter of 2022, and underestimated it by 5.32% in the first quarter of 2023.