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Illustration: Rebecca Zisser/Axios

When it comes to making predictions about the world economy, policymakers and asset managers are whiffing because they are failing to account for the increasingly dysfunctional state of global politics.

The big picture: The world's top economic concerns — Brexit, the U.S.-China trade war — are the result of policy decisions rather than unavoidable shocks.

Why it matters: IMF officials, whose forecasts are used by top central bank officials and finance ministers in a majority of the world's countries, can't say how they're incorporating politics into projections.

  • "We do see that policy uncertainty, and in many cases bad decisions are a root cause for financial distress," IMF financial counselor Tobias Adrian told Axios at the organization's spring meetings last week.
  • Asked specifically how that's being used in economic outlooks: "It is a risk, and we’re looking at it closely."
  • Questions posed to IMF deputy managing director David Lipton and chief economist Gita Gopinath yielded largely similar answers.

Checking the numbers: A recent Bloomberg analysis found that on average, the IMF's forecasts are off by 2 percentage points — a wide margin given that GDP growth in most countries is in single digits.

  • Private forecasters don't do much better, according to a 2014 report from the IMF Independent Evaluation Office. It's largely for the same reason.

A much ballyhooed report from multinational bank Standard Chartered predicted by 2030 India would surpass the U.S. in terms of economic size, China would have double its GDP (measured by purchasing power parity), and 7 of the world’s 10 largest economies would be current developing countries.

  • It too ignored politics, even though expected rising stars like Turkey, Russia and Brazil are now in the midst of politically derived economic uncertainty.

"It's very hard to pinpoint political dynamics," Madhur Jha, senior global economist at Standard Chartered, told Axios in January. "So that’s something that is a risk and a clear risk but not something we can explicitly take into account when we make projections."

The bottom line: A clear example of the importance of political leadership is the BRICS countries — Brazil, Russia, India, China and South Africa — which ahead of the financial crisis were all seeing GDP growth above 5% annually.

  • Since then, China and India have had steady leadership with clear policy direction. South Africa and Brazil have deposed sitting presidents, while Russia's president has cost the country billions of dollars in international sanctions.
  • India and China's economies grew 48% and 79%, respectively, between 2011 and 2018, whereas Brazil, South Africa and Russia's economies shrank by double digits.

Go deeper: The global economy's "delicate moment"

Go deeper

Dan Primack, author of Pro Rata
57 mins ago - Technology

TikTok gets more time (again)

Illustration: Aïda Amer/Axios

The White House is again giving TikTok's Chinese parent company more to satisfy national security concerns, rather than initiating legal action, a source familiar with the situation tells Axios.

The state of play: China's ByteDance had until Friday to resolve issues raised by the Committee on Foreign Investment in the U.S. (CFIUS), which is chaired by Treasury secretary Steve Mnuchin. This was the company's third deadline, with CFIUS having provided two earlier extensions.

Federal judge orders Trump administration to restore DACA

DACA recipients and their supporters rally outside the U.S. Supreme Court on June 18. Photo: Drew Angerer via Getty

A federal judge on Friday ordered the Trump administration to fully restore the Deferred Action for Childhood Arrivals program, giving undocumented immigrants who arrived in the U.S. as children a chance to petition for protection from deportation.

Why it matters: DACA was implemented under former President Obama, but President Trump has sought to undo the program since taking office. Friday’s ruling will require Department of Homeland Security officers to begin accepting applications starting Monday and guarantee that work permits are valid for two years.

Updated 3 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Politics: Fauci says he accepted Biden's offer to be chief medical adviser "on the spot" — The recovery needs rocket fuel.
  2. Health: CDC: It's time for "universal face mask use" — Death rates rising across the country — Study: Increased testing can reduce transmission.
  3. Economy: U.S. economy adds 245,000 jobs in November as recovery slows — America's hidden depression: K-shaped recovery threatens Biden administration.
  4. Cities: Bay Area counties to enact stay-at-home order ahead of state mandate
  5. Vaccine: What vaccine trials still need to do.
  6. World: UN warns "2021 is literally going to be catastrophic"
  7. 🎧 Podcast: Former FDA chief Rob Califf on the vaccine approval process.