The Banking Executive Magazine - May 2026 Issue

New Approaches to Economic Forecasting WHEN THE FUTURE DEFIES THE PAST: NEW APPROACHES TO ECONOMIC FORECASTING The global economic landscape has rarely appeared as unsettled as it does today. Recent geopolitical de- velopments, particularly the escala- tion of conflict in the Middle East, have once again exposed the fragility of long-standing economic assump- tions. Energy markets have reacted sharply, supply routes have come under strain, and policymakers across the world find themselves confronting a familiar yet unresolved question: how to anticipate what lies ahead when the foundations of the system itself appear to be shifting. For decades, economic forecasting rested on a relatively stable premise. From the mid-1980s until the onset of the COVID-19 pandemic, the global economy exhibited a degree of predictability that allowed central banks, ministries of finance, and fi- nancial institutions to operate with a high level of confidence. Inflation re- mained contained, supply chains functioned efficiently, and the trans- mission mechanisms of economic shocks were broadly understood. Within such an environment, fore- casting tools evolved accordingly— favoring a central baseline projection supplemented by probabilistic the BANKING EXECUTIVE 30 ISSUE 209 MAY 2026 • Forecasting models fail in structural uncertainty • Multiple scenarios replace single baseline thinking • Arab banks must adapt to shifting realities