Forecasting: Good News From Bank Messaging Flows

by Cesar Bacani, 28 May 2012

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Budgeting and Planning forecasting SWIFT

When CFO Innovation spoke to Andre Boico in May 2010, the global economy seemed in danger of sliding back to perilous times. The world had dodged – barely – a new Great Depression in 2008, but the recovery from the very deep trough was tepid. Some analysts were even predicting a return to the brink.

Not Boico. The Managing Director and Head of Pricing & Business Analysis at SWIFT, the body that provides secure messaging services to most of the world’s banks, had confidently said that the global recovery was intact. He knew this because SWIFT could track the flow of money from bank to bank, including letters of credit and customer transfers.

He was proved right. Led by Asia and other emerging markets, the global economy expanded sharply – by 4% – in 2010, after contracting by minus-2.4% in 2009. What the message flow was telling Boico in May 2010 was that the flow of transactions linked to GDP growth was strongly rising.

What about today?

CFO Innovation recently caught up with Boico in Hong Kong. Two years on, he and his colleagues at SWIFT and academics from Belgium’s University of Louvain had developed a more refined tool to forecast the “very near future and the very recent past,” as Boico puts it.

The new SWIFT Index (click here to access the website) combines header information from MT 103 traffic – this is the message type that banks use to make customer transfers – and linear models that use as inputs actual quarterly GDP growth figures of the OECD (Organisation for Economic Cooperation and Development) countries, which account for about half of the global economy in purchasing-power parity terms – even though China is not in the OECD.

The latest SWIFT Index was published on 22 May, and it seems there is still hope for the global economy, despite the trials and tribulations of Europe. The Index forecasts second-quarter 2012 growth in the OECD at 0.8% quarter-on-quarter and 2.1% year-on-year, and third-quarter growth at 0.6% quarter-on-quarter and 2.2% year-on-year.

Click image to enlarge

The OECD economies will still grow despite Europe’s woes

“SWIFT can be a leading indicator, not necessarily a leading indicator for the following year but at least a leading indicator for two elements,” says Boico.

One is “nowcasting,” which tackles the problem of predicting the present (because economic data is not real-time), the very near future – the current quarter, say – and the very recent past – say the previous quarter.

These days having a career

Submitted by adella on 19 September 2012 - 5:48am

These days having a career may be hard, the only purpose for which you struggle daily is a good salary. Payments need to be fast and accurate, the fees minimal and the prices small enough to let people having all they need to survive day by day.

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