🚨 NEW: Updated Q3 October 2021 Forecasts5 min read

This is our last forecast of 2021 and there are a few surprises. In this story we’ll guide you through the main changes and takeaways from our latest forecast, as well as note what this means for how we approach our 2022 forecasts. We produce quarterly forecasts on Humanitarian Funding Forecast – and all the Sector Pages are updated at the start of January, April, July and October with the latest forecast for that year. We update the forecasts throughout the year as more information comes in and we understand how much each sector has received so far in the year.

This is our Q3 forecast (called Q3 as it follows just after the end of the third quarter, i.e. end of September). It takes into account our initial forecast (Q0 – in other words before any data), which feeds in historic data. But more importantly at this point in the year it also takes into account how things are going in the current year. All sector pages are updated with the new forecasts, so head on over to those pages to get a deep dive on individual sectors.

Funding required has increased a huge amount between July and September

Funding required to the different humanitarian sectors has increased by a lot in the last quarter. Early Recovery experienced a 245% increase, Agriculture experienced a 144% increase, and Protection experienced a 116% increase in funding required.

It’s not just a few sectors either – every single sector experienced an increase in the funding required. The median sector experienced an increase of 43% in the last quarter, which, given that we were past half way through 2021 already is a huge increase from nowhere.

At face value it’s tempting to look at the increases in funding required on one hand, and on the other hand think about new Flash Appeals in Haiti and Afghanistan, and new Humanitarian Response Plans in El Salvador, Guatemala and Honduras and conclude that the increases are due to new unexpected response plans. However, we don’t think that’s right.

We can’t say for sure as we don’t have a record, but we think these increases are as a result of expected response plans. By “expected plans”, we are talking about plans we knew were coming but hadn’t been published by the end of June. In particular, refugee response plans (RRPs). Historically ‘Multi-Sector’ was used as a catch all bucket for RRPs – we wouldn’t have visibility of the funding required for the sectoral responses in those plans. However, in 2021, we now have sector breakdowns, which is good news!

The bad news is that we didn’t have these breakdowns until the last quarter (we think, though we can’t verify). Take the Syria Refugee Response – the Education requirement is $831m. At the end of Q2 we thought the Education requirement was $1.4bn – now it’s $2.8bn. This is the effect of the requirements coming in late during the year.

Take another example, we thought that Early Recovery receiving $33m by the end of Q2 wasn’t great given the $402m requirement. But if we had known the requirement was $1.4bn we would’ve concluded that $33m received was a whole different magnitude of poor performance compared to the needs.

There are only a couple of good performers compared to last year, and a lot of bad performers

Our Q3 edition forecasts that two sectors will receive substantially more than 2020. These are Gender-Based Violence (GBV), and Coordination and Support Services.

For Gender-Based Violence, you might ask whether this is a ‘real increase’, or an increase due to better visibility in the data. Unlike previous years where the Protection-related domains of Child Protection and GBV have become more visible in the data (and thus it was questionable if they experienced ‘real’ increases in funding), we are confident that this is a real increase. This is simply because Child Protection is forecast to decline by 31% this year. A huge de-coupling between these two sectors could only happen if the limit of what could become ‘more visible’ in the data had been reached, and we think it has. GBV is forecast to see a 77% increase in funding, which is very substantial.

Coordination and Support Services is the only other sector forecast to increase in 2021. Whilst we don’t have any firm explanation of this, we tend to think of the Coordination sector as slightly different than other sectors. It’s not tied to the winds of the funding rollercoaster that other sectors are – see more on the sector page.

The bad news is that there are at least five sectors that are forecast to experience a substantial decrease on 2020 values: these are Health (maybe understandable given it’s high point last year), Camp Coordination / Management, and three Protection related sectors: Child Protection, Mine Action, and Protection. This is symptomatic of a larger head wind for humanitarian funding. 2021 is forecast to be a worse year for funding than 2020 for all humanitarian funding.

And the results are in…

Below is a compilation of the final forecast of 2021 for all humanitarian sectors. The rankings of the sectors shouldn’t be any surprise – Food Security on top, followed by Multi-Sector, Nutrition and Health.

What is a surprise is just how much red there is in the table when we look at the forecasted value versus 2020 numbers.

So why the surprises?

We don’t know yet. Humanitarian funding doesn’t decline for no reason. Funding to response plans has increased every year from 2015, and there has been a steady upward trend since 2012.

We’ll have to do a post-mortem of our forecasting methodology this year. On our forecast page we’ve written this: “The most important variables that determine funding the next year are funding in the previous year, and the funding requirement. Other variables may improve our model on the margins, but not by much”. Our first hot-take would be that we have to change this and properly consider economic fundamentals far more. The effect of COVID – and more importantly the ensuing global economic downturn – will have had an impact on giving to humanitarian causes. We’ll look to see how we can account for this in our models.

Our second hot-take is that the randomness at which funding requirements are declared causes another challenge for our forecasts – or, in reality, how we express those forecasts.