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Reforms and Investments

Upgrading the Modelling Toolbox to Support Macroeconomic Forecasting in Slovenia

Supporting reforms to ensure efficient and effective revenue administration and public financial management

Funding Programme
Year
  • 2024

Upgrading the Modelling Toolbox to Support Macroeconomic Forecasting in Slovenia

The European Commission supported the Institute of Macroeconomic Analysis and Development (IMAD) to develop new tools for macroeconomic forecasting. These models create a consistent baseline scenario and deliver clearer projections, including uncertainties, risks, and alternative scenarios. The improved insights support better budget planning and more informed policy decisions.

Context

The Institute of Macroeconomic Analysis and Development (IMAD), Slovenia’s Independent Fiscal Institution, prepares macroeconomic forecasts that guide budget planning and economic policy. Before the project, its forecasting process was labour intensive and constrained by limited modelling capacity. The project provided technical support to develop more advanced analytical instruments for nowcasting, forecasting, and scenario analysis. These improvements strengthened IMAD’s analytical capabilities and supported its role as an EU Independent Fiscal Institution responsible for producing macroeconomic forecasts under the revised EU economic governance framework.

Support delivered

The support aimed to strengthen IMAD’s macroeconomic forecasting system through a structured mix of diagnostics, model development, and capacity building. It began with an in-depth review of existing forecasting tools, followed by recommendations for designing more advanced nowcasting and forecasting models. Successive versions of these models were then developed, documented, and refined to ensure practical usability. Throughout the project, IMAD also actively contributed its own knowledge, experience, and insights into the Slovenian economy, providing comments, feedback, and practical expertise. The assistance concluded with fully developed models, a comprehensive technical note with recommendations, and a final report summarizing the project’s achievements.

Results achieved

The project resulted in:

  1. A new nowcasting toolbox, which complements IMAD’s existing approach and offers a range of different methods, along with substantial flexibility in parameterisation and other user settings, with the ability to carry out forecast combination, prepare short-term projections, and consider uncertainty and the possibility of (mild) structural change. Such an approach has been shown in the literature to improve the robustness of short-term forecasts.
  2. The new macroeconometric model follows the development of similar models in peer institutions that produce macroeconomic forecasts, while maintaining the important role of expert judgment.
    Advanced analytical tools for short-term projections, long-term forecasting and sensitivity/scenario analysis will further contribute to the efficient forecasting of economic developments.

Useful links

More about the project

You can read the documents related to the project here: