Predicting the unpredictable

Economists no worse than football pundits

Nikhil B. Srivivasan
Bankok Post

On Tuesday night, I sat with a partisan restaurant crowd who cheered Korea on to one of the biggest upsets of the World Cup _ beating Italy. Korea played with their heart and deserved to win. Ahn Jung-Hwan who scored the winning goal will be immortalised for his feat. It was disappointing for me, though.

I have followed the travails of Italy and Argentina (another of my favourite teams) since I was about 10 _ as a child Paolo Rossi and Diego Maradona were my heroes. Rossi's goals in the 1982 World Cup are still etched in my mind. Their heirs have let me and millions of others down by exiting the tournament at such an early stage.

The World Cup has been a shock, or at least a massive surprise. The much-fancied teams _ France, Italy, Argentina _ have all gone home. Others like Spain have made it this far by the skin of their teeth. Only stalwart Brazil remains _ a team whose chances at this World Cup were much under-rated going in. The United States, a country that does not even take the sport that seriously, has made to the last eight. Senegal is finally living up to the expectations for African football. And England is still there.

The forecasters, the pundits, the ``people who know'', were all wrong. Their predictions about the outcome of this Cup have come to nought. And that is the broader point in this column. Prediction is almost purely an art. And as an art, it should be considered but not embraced without careful consideration.

Funnily enough, even investment banks such as Goldman Sachs, weighed in with a 50-page report on who they thought would will win based on their own analysis. Of their four possible winners, three have already been eliminated.

Proper analysis, which no one seems to have done, may have suggested several things before the tournament _ things that became apparent as the tournament wore on.

The French were tired and over-confident. The minute Zidane was ruled out of the first-round matches, it was as if they had lost their will to win. The Argentine coach was much revered in the media as an ``intellectual''. Every time the camera swung to him, one saw him deep in thought. Well, all that thinking delivered nothing.

It is easy to blame particular players, but motivation and strategy are the big part of the game. And here's where the coach plays an instrumental role. Portugal, which came in as a dark horse, did not seem to function as a team and played without any perceptible passion. As for Italy, my heart breaks. Cool uniforms, some bad luck, but to bow out in the way they did? Of course, all the teams immediately blamed their bad luck. They would, wouldn't they?

So, to predict is worthwhile, but any prediction should not be adopted without thought. This is not to suggest that predictions don't come true. They do. But even when they do, they can take longer to occur than is initially expected. After all, we live in a dynamic world that is constantly changing.

Here's a more relevant illustration for this section. Last year, when economists were predicting Thailand's GDP growth, most people's expectations were low. In addition, people worried about interest rates going up. They have been proven wrong. Consumption and government spending have boosted GDP growth to close to 4%. As for rising rates, forget about it. There is too much money around. The discount to the minimum lending rate available from banks for good corporate borrowers shows exactly how liquid we are today.

Now, with good numbers coming out on GDP and so on, people are naturally raising expectations for the rest of the year. As always, most economists adjust only when the reality is blindingly obvious. In this case, government measures have worked thus far.

Having been caught short on GDP growth estimates, now people are targeting rapid consumer credit growth and the current account as problems and raising the red flag. Here's my little prediction: Neither will have a drastic negative impact. On the consumer loan front, I am not worried for two reasons. First, consumer loans remain a very small part of total borrowing in the system. Credit card outstanding balances are about 1% of the total outstanding. Also, I think banks and finance firms have better risk-management systems in place this time around. As for certain firms charging high rates, that's a hedge against a higher delinquency rate.

As for the current account, it is not alarming as it is small. Also, don't forget there is positive inflow in the capital account. So, not much to worry about. Of course, I could _ like all the football pundits _ be wrong.

Returning to the World Cup, I do not even want to imagine how much money has been lost by gamblers betting on the favoured teams. Not something to talk about in polite company I guess. But for those that invest in overseas stocks, I would be looking at the bookmaker William Hill. It just did an IPO in London. Given the betting volumes and the consequences, I think betting on William Hill is a lot safer than betting on a team to win this World Cup.