ESRI: Politics affected fiscal forecasts

Government fiscal forecasts tend to be heavily influenced by the electoral cycle and are less reactive to economic cycles, particularly during downturns, which has huge policy implications, according to a new report by the ESRI.

To avoid the pitfalls of political pressure on economic forecasting, the authors recommend that one possible course of remedial action is imposing heavy fines and other sanctions on governments with a poor track record of fiscal forecasts. Another option is to create independent national forecast agencies, said the ESRI.

The problem of inaccurate economic forecasts became particularly acute at the advent of the eurozone financial and debt crises which started in 2008.