Abstract
The accuracy of the National Treasury's projections of GDP and key fiscal aggregates is comparable to that of the projections of private sector economists, other reputable organisations and the fiscal authorities of other countries. The errors in the projections of the National Treasury have nonetheless been substantial in some years, and have increased from 2000/01 to 2010/11. This paper argues that the credibility of fiscal policy would have been severely tested if the largest annual errors in respect of the various aggregates had coincided. Against this backdrop, the paper makes the case for structured bi-annual discussions of government’s forecasts during public parliamentary hearings as a mechanism for improving the accuracy and credibility of official projections. It also discusses the potential benefits for South Africa of two alternative mechanisms, namely fiscal councils and committees of independent experts.
Highlights
The accuracy and impartiality of the forecasts used to set the annual national budget have important implications for the credibility of a country’s fiscal policy
This paper argues that the establishment of a regular forum for the discussion of such forecasts should enhance the credibility of fiscal policymaking in South Africa by contributing to improved projections and more mature, non-partisan public discussion of the fiscal outlook
Van der Wath (2013) compares the accuracy of the macroeconomic forecasts of the Bureau of Economic Research (BER) at the University of Stellenbosch with those of the National Treasury, the International Monetary Fund (IMF), the consensus forecast of the private-sector and academic economists participating in the Economist of the Year competition sponsored by Sake24, and two mechanical benchmarks
Summary
The accuracy and impartiality of the forecasts used to set the annual national budget have important implications for the credibility of a country’s fiscal policy. This paper argues that the establishment of a regular forum for the discussion of such forecasts should enhance the credibility of fiscal policymaking in South Africa by contributing to improved projections and more mature, non-partisan public discussion of the fiscal outlook. It proposes the introduction of biannual discussions, during public parliamentary hearings, of the forecasts used to set the national budgets.
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