www.fs-rs.si / News / News / An ex post evaluation of forecasts of macroeconomic and fiscal aggregates in the reference period 2018 – 2021
Published: 08/22/2022

An ex post evaluation of forecasts of macroeconomic and fiscal aggregates in the reference period 2018 – 2021

The present analysis of deviations in forecasts, which the Fiscal Council is required to prepare every two years in accordance with legislation, is truncated. The legislation adopted in 2020 determines that 2020 and 2021 are not to be taken into account in the analysis of forecast deviations, which limits the relevance of this ex-post evaluation of forecast deviations for the 2018-2021 period. Accordingly, merely for the sake of continuity, we have produced only a shorter evaluation with a limited set of variables. The short period that can be included in the analysis, unlike the previous analysis from 2020, is also the reason for not making proposals to the Institute of Macroeconomic Analysis and Development and the Ministry of Finance, which draw up macroeconomic and public finance forecasts, respectively. These legal provisions will also impair the next forecast deviation analysis for the period 2020-2023, which the Fiscal Council is required to produce in 2024.

Shocks affecting the deviation of actual outturns from previous forecasts are common and do not necessarily affect the bias of the forecast, which is one of the essential elements of forecast quality. Despite the possible exclusion of individual years marked by unexpected circumstances from subsequent analyses of forecast deviations, it is an undeniable fact that shocks can have important long-term public finance implications. As the effects of shocks can significantly limit the future room for manoeuvre of fiscal policy, the periods in which they occur must also be included in ex-post analyses of forecast deviations.

Our assessment is that in times of heightened uncertainty, it is even more necessary than in normal times to ensure transparency in policy planning and implementation. Otherwise, at a time of shocks, which are often cushioned by increased public spending, there may also be room for non-transparent and irrational or unjustified spending of public funds, which can lead to a deterioration in the long-term sustainability of public finances. It is the imposition of exceptional circumstances in 2020 and 2021 that, in the view of the Fiscal Council, was accompanied by less transparent and less credible fiscal planning in the part that does not cover the direct impact of measures to mitigate the effects of the epidemic.

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