Conclusion: The Perils of Data Opacity

Conclusion: The Perils of Data Opacity

Data opacity is holding back the MENA region on multiple fronts. It prevents the region from reaching its growth potential. On the health front, it has debilitated the region’s response to the COVID-19 pandemic. And it also hinders foresight and planning because forecasts veer far from what actually happens. The benefits of a good data ecosystem are manifold, and governments in the region should embrace an evidence-based approach to policymaking (Arezki and others 2020; Islam and Lederman 2020).

Upgrading data ecosystems is likely to improve forecasts. In particular, the overall data ecosystem is important, not just those elements related to forecasting. Transparency of information builds trust and can lessen political upheaval and conflict, both of which affect the accuracy of forecasts. More important, improvements in the data ecosystem can reduce forecast optimism. There is evidence that overly optimistic forecasts result in economic contractions due to the buildup of public debt (Beaudry and Willem 2022). Optimism and overconfidence may be more prevalent in the absence of good quality data. Evidence of this has been seen in the health systems in the MENA region, which judged themselves better prepared to deal with a health crisis than they turned out to be (Gatti and others 2021).

Forecasters in the MENA region face the substantial challenge of volatile growth. Commodity price shocks and the presence of conflict contribute to volatility, which makes it harder to forecast growth in the region. Conflict particularly can destroy data systems. Political influence may also play a prominent role in hampering forecasts. Local forecasters are far less accurate than regional and international forecasts. Local forecasters may have access to more information, but they are also susceptible to influence. The analysis here finds that even after accounting for growth volatility, commodity shocks, conflict, and political institutions, data transparency is a significant determinant of the accuracy of growth forecasts.

Besides improving the broad data ecosystem, governments in the region should also consider specific steps that could improve forecasts. World Bank country economists across the MENA region report several challenges they face in forecasting growth. In some cases, data were scarce. In other cases, data were available but important subcomponents were missing. Even when high frequency data were accessible, information for that last important quarter was missing, which hampered forecasts. And at times, there would be data reporting stoppages for no apparent reason. Country economists across the MENA region have made the following recommendations to improve growth forecasts. First, increasing the frequency and quality of national accounts data can improve forecasts considerably. Second, consistent data are important to forecasts, and consistency can be achieved through better communication between ministries and national statistical offices. Third, technical assistance to governments can help improve the quality of national statistics, which in turn will improve the information that is fed into forecast models. Fourth, for countries in conflict, alternative data sources such as information from satellites (for example, night lights data) are crucial and, in this regard, the World Bank can play an important role in facilitating access to such data.