Economic Scenarios

Moody's Analytics Economic Forecast Scenarios are the foundation of "what if?" analysis for risk management and strategic planning needs. Clients from a broad range of industries use our scenarios to test the impact of shocks and differing economic assumptions on their businesses and portfolios. Scenarios are produced and maintained by a team of economists using our fully specified global macroeconomic forecast model.

Methodology

Our scenario-driven approach to forecasting begins with our baseline forecast. We define this as the “most likely outcome” based on current conditions and our view of where the economy is headed. We then develop the basic outlines of our alternative scenarios by running multiple simulations to develop a probability distribution of economic outcomes. The Percentiles refer to the position of a given scenario in a distribution of possible economic outcomes. The Baseline is positioned at the 50th percentile.

• BL Baseline Forecast
• CF Consensus Forecast
• S0 Alternative Scenario Upside - 4th Percentile
• S1 Alternative Scenario Upside - 10th Percentile
• S2 Alternative Scenario Downside - 75th Percentile
• S3 Alternative Scenario Downside - 90th Percentile
• S4 Alternative Scenario Downside - 96th Percentile
• CS Alternative Scenario Constant Severity - Downside - 99th Percentile
• S5 Below-Trend Long-Term Growth Scenario
• S6 Stagflation Scenario
• S7 Next-Cycle Recession Scenario
• S8 Low Oil Price Scenario
• Other Narrative Based Scenarios (i.e. Sovereign Debt, Trade War)

Key Features

• Comprehensive Coverage
  Our economists produce forecasts for 100+ countries/jurisdictions and 12,000+ variables using our fully-specified structural global macroeconomic model. Countries/jurisdictions are interlinked by trade flows, financial markets, prices and investments.
• Updated Monthly
  Forecasts are updated monthly. Underlying historical data are updated as soon as sources publish new figures. We estimate gaps in as-reported data to create uninterrupted time series that are consistent across geographies.
• Fully Documented
  We furnish a fully documented model methodology and validation reports as well as narratives for our baseline forecasts and each scenario. Clients also have access to economists, data and client services teams for support.
• Flexible Delivery Options
  Download or automate delivery of forecasts through our Data Buffet service, access directly within Excel using our Add-in, or retrieve programmatically via an API. All delivery options are complementary with your subscription.

Applications

• Business and Contingency Planning
  Mitigate risk by proactively assessing losses and capital levels under various scenarios. By linking your performance drivers to the global economic activity represented in our scenarios, you can generate more realistic results.
• Expected Credit Loss (ECL)
  Employ multiple, defensible, probability-weighted scenarios to calculate expected credit losses for IFRS 9 and CECL. Leverage a comprehensive set of indicators beyond headline numbers to gain insights into specific risk factors.
• Stress-Testing
  Mitigate risk by proactively assessing losses and capital levels under various scenarios. By linking your performance drivers to the global economic activity represented in our scenarios, you can generate more realistic results.
• Risk Management and Validation
  Benchmark internal forecasts and models under independent scenarios to expose vulnerabilities to mitigate risk more effectively.

Benefits

• Accuracy
  Analyze with confidence using trusted scenarios maintained by our economists.
• Timeliness
  Account for the most recent data and expectations with monthly scenario updates.
• Depth
  Take advantage of scenarios that include a comprehensive set of economic indicators.
• Transparency
  Fully understand our forecast methodology and assumptions through detailed documentation.
• Efficiency
  Quickly incorporate our off-the-shelf scenarios into your processes.