The world in the onslaught of COVID-19 is in uncertain times and has caught everyone off guard which has had negative implications on the economy. While economic forecasts offer no certainty, there are indicators to show useful models and predictions of the future but are time-sensitive, often constrained to monthly, quarterly, or yearly periods.
With the pandemic still plaguing the rest of the world, most especially third-world countries such as the Philippines, a timely response towards recovery backed by data is imperative.
In the same vein, the Asian Development Bank (ADB) along with the Asian Institute of Management (AIM) in 2020 launched a global hackathon to source digital innovative solutions to combat “the medium- and long-term effects of the novel coronavirus disease (COVID-19) pandemic.” One of these challenges under economic development is “Nowcasting the Economic Impact of COVID-19.”
Nowcasting, originating from meteorology is “the description of the current state of the weather in detail and the prediction of changes that can be expected on a timescale of a few hours” (Browning, 1981). In economics, it predicts an economic state in a very short timeline using big data. Nowcasting, as ADB believes, would “provide timely measures of economic activity using alternative data sources and new approaches,” for stakeholders to “make sense of real-time economic performance as the crisis unfolds rapidly.”
The winning team, dData assessed data from 3 countries including the Philippines which was categorized as a “high data country” and found that their model accurately predicts economic output from the 2008-2009 financial crisis using roughly 150 macroeconomic variables with daily, monthly and annual frequencies. One of the finalists from the Philippines under Ateneo de Manila University, Team ACLS used import data via port calls, container throughput, cargo throughput, and customs data. The team believes that imports, in the Asia and the Pacific region, make up a big portion of GDP and found “strong correlations between their chosen real-time leading indicators and official import statistics.”
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Imports and exports or trading are important for developing countries. Ali & Stancil (2009) believe it reflects “foreign exchange availability and purchasing power, a rapidly growing middle class, and a great appetite for imported goods.” They also predicted that the share of developing countries to world trade would expand to nearly 70% in 2050. Countries being open to trade, according to de Córdoba, also “stimulate[s] economic progress and alleviate[s] poverty,” as these countries can sell and buy more from participating countries. Trade also affects the strength of a country’s currency, with strong currencies reflecting cheaper imports. High imports reflect a growing economy with robust domestic demand.
Nowcasting is a game-changer especially for developing countries in economic forecasting and consequently making prompt decisions for recovery, growth, and even employing counter-measures for anticipated events.
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