WEFM
World Economic Forecasting Model for macroeconomic forecasts, policy scenarios, and national planning
Understanding WEFM
Governments need forecasts that are internally consistent across the whole global economy. A change in one country can affect trading partners through exports, imports, prices, exchange rates, remittances, capital flows, and confidence. The World Economic Forecasting Model (WEFM) helps analysts trace those linkages and compare how different assumptions or policy responses can affect economic outcomes.
WEFM was developed by the United Nations Department of Economic and Social Affairs to support globally consistent forecasts for the World Economic Situation and Prospects (WESP), the WESP Update, and Project LINK. It uses a bottom-up structure: individual country models are linked through international trade so that country forecasts add up to a coherent global outlook.
At country level, WEFM brings together the main blocks of the macroeconomy: households, firms, government, and the foreign sector. The model can be used to build a baseline forecast and then test alternative scenarios, such as commodity-price shocks, fiscal stimulus, trade disruptions, changes in monetary policy, migration flows, or shifts in trend productivity.
WEFM Purpose
The end goal of a WEFM assessment is to help governments and analysts connect macroeconomic forecasts with policy choices and global risks, with roughly 3 main purposes:
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Macroeconomic forecasting: produce consistent projections for GDP, inflation, unemployment, trade, current account balances, fiscal balances, and other core indicators. For example: What is the baseline outlook for growth and fiscal balances? How do national forecasts align with global and regional trends?
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Scenario analysis: compare a baseline forecast with alternative assumptions about shocks, policies, and external conditions. For example: What happens if oil prices rise sharply? How would weaker global demand affect exports and growth? What are the spillovers from policy changes in major economies?
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Macro-fiscal planning: assess how government spending, revenues, debt, and social expenditure choices interact with growth and development objectives. For example: Which expenditure strategies support development priorities while maintaining debt sustainability? How do fiscal policies affect poverty and employment?
WEFM Implementation
To implement a WEFM-based assessment or country simulation, there are typically 4 phases:
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1. Policy Question & Scope
Define the forecasting or policy question, the time horizon, the target indicators, and the national or regional context.
Activities: Identify priority policy questions; select baseline and alternative scenarios; define the relevant macroeconomic, fiscal, external-sector, and development indicators; agree on institutional roles and review needs.
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2. Country Model Customization
Adapt the country model to local data availability, institutional priorities, and policy instruments.
Activities: Calibrate model parameters; update or expand model equations where needed; include fiscal or social-expenditure modules if needed; validate the baseline against known economic relationships.
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3. Scenario Simulation
Run alternative assumptions and policy shocks to compare outcomes against the baseline forecast.
Activities: Design external and domestic shocks; simulate policy options; compare impacts on growth, employment, inflation, current account balances, fiscal balances, debt, poverty, and other development indicators; test sensitivities.
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4. Policy Interpretation
Translate model results into practical insights for forecasting teams, finance ministries, planning agencies, central banks, and policy advisers.
Activities: Prepare charts and scenario comparisons; identify trade-offs, risks, and fiscal constraints; draft policy notes, technical reports, presentations, training materials, and user manuals; support repeated use by national teams.
