Bernard Durkan (Kildare North, Fine Gael)
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Question 101: To ask the Minister for Finance if he proposes to take action to ensure that economic forecasting by his Department is more soundly based than in the past five years; and if he will make a statement on the matter. [12744/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am satisfied that economic forecasting in my Department is as soundly based as it can possibly be. The Deputy will note that even in normal circumstances short-term economic forecasting is not an exact science, given the many dynamic components which constitute an economy. We are not now in normal economic times and the frequency that all other forecasters, national and international, have revised their forecasts points to the unusually high degree of uncertainty that exists.

Following the extraordinary financial market developments last September, the global economy has entered uncharted waters, and in this new environment virtually all economic forecasters — the world over — are finding it difficult to make accurate projections.

Analysis published alongside the 2006 Budget showed that my Department's macro-economic forecasts over the period 1997-2004 were amongst the most accurate of those produced by the major domestic and international economic forecasters. Since then, my Department has continued to perform well in terms of macro-economic projections.

In early January when my Department published its forecast it was one of the most pessimistic forecasts available. Since then most other commentators have reduced their forecasts reflecting international economic data that have become available.

The approach taken by my Department is to identify the most likely outcome and to outline the main risks — both upside and downside — to this. This is in line with other organisations that produce regular forecasts on the Irish economy.