Bernard Durkan (Kildare North, Fine Gael)
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Question 19: To ask the Minister for Finance if he is satisfied that the procedures by which he predicts future economic trends are adequate in view of the fact that new and more serious economic issues seem to arise unexpectedly on a weekly basis; if he is further satisfied that the full extent of the current economic situation was foreseeable a year ago; if not, the reason for same; the steps he proposes to take to ensure that future economic forecasts reflect with some degree of accuracy the expected situation arising within a specific period and that, as a result, the necessary budgetary measures can be taken in sufficient time to avert the impact of uncertainty and lack of confidence which affects the economy here; and if he will make a statement on the matter. [12453/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am satisfied with the procedures in place to conduct economic forecasting in my Department.

Even in a normal environment, it must be noted that short-term economic forecasting is not an exact science, given the many dynamic components which make up the economy. But we are not in a normal environment — conditions in the global economy are unfolding at a rapid pace, and this reflects the fall-out from the unprecedented financial market turbulence last September. As a result of this, the uncertainty associated with forecasting is heightened to an almost unprecedented level, not just in Ireland but in almost every country in the world.

This fact of how uncertain the global economic situation is can be seen by the frequency by which organisations such as the International Monetary Fund, OECD and EU Commission have reversed their forecasts for the global economy. The current global situation was not foreseen a year ago and it largely reflects a dramatic intensification of financial market difficulties since last September. The impact of this on the global economy is evolving.

My Department's approach, which is similar to others, is to identify the most likely outcome and then to identify the various risks — both domestic and international to this projection. The majority of current difficulties were identified as risks in both Budget 2009 and in the Addendum to the Stability Programme Update published in January.