The International Monetary Fund (IMF) has done it again. In an attempt to garner some press, the head of the IMF’s Western Hemisphere Department Alejandro Werner forecasted that Venezuela’s annual inflation rate will reach 1,000,000% by year’s end. By my calculations, this inflation forecast implies that the exchange rate will reach 923 million VEF/USD by December 2018. To put this into context, the exchange rate at the end of July was 3.3 million VEF/USD, and at the end of June it was 3.1 million VEF/USD.
The IMF’s most recent inflation forecast is, to put it mildly, stunning. It is also bogus. No one can forecast the course or duration of a hyperinflation with any degree of accuracy. Never mind. The IMF just keeps on making forecasts of Venezuela’s inflation. And the press keeps on uncritically reporting the IMF’s bogus numbers as if they were credible. The IMF and the press are clearly unaware of the fact that hyperinflation can be measured, and measured very accurately, but it cannot be forecasted.
To get a handle on the IMF’s production of bogus forecasts for Venezuela’s inflation, consider that, during the past year and a half, the IMF has reported a variety of numbers for the annual inflation rate in Venezuela. None of the IMF’s numbers can be replicated. This is a problem — one that renders all of the IMF’s inflation numbers unusable because, among other things, they fail to pass the scientific smell test. The following is a catalogue of the IMF’s inflation numbers for Venezuela that have been reported since September 2016.
IMF World Economic Outlook, October 2016
IMF World Economic Outlook, April 2017
