WRITTEN QUESTION E-1452/97 by Joaquim Miranda (GUE/NGL) and Sérgio Ribeiro (GUE/NGL) to the Commission (28 April 1997)

Subject: Economic estimates and forecasts published by the Commission

The Commission's economic data, estimates and forecasts for spring/summer 1997 have just been published in Portugal.

Following on from the excessively optimistic tone adopted by the Commission's annual economic report, which was recently highlighted in Parliament's resolution, these data, estimates and forecasts outdo the already excessive optimism which is a feature of the Portuguese Government's positions. This appears surprising, since it goes beyond the Commission's understandable efforts to create a climate of confidence which will boost the economy and help the operations now under way. It will inevitably lead to a downwards revision from the figures published as estimates and forecasts to the figures which will later have to be given as actual data. Such discrepancies have become standard practice and now risk becoming even more pronounced, which may in turn undermine credibility.

What is the scientific and technical basis for these figures, what model was used and from which source did the information come, what revisions have already been made to the estimates and forecasts and, finally, does the Commission's excessive optimism not stem from the current campaign in favour of the euro which now determines all the actions of the Commission and of some governments such as that of Portugal?

Answer given by Mr de Silguy on behalf of the Commission (16 June 1997)

The Commission's spring 1997 forecast was published on 23 April 1997 ((Planning II 70/97. )). Any figures published prior to that date should not be considered part of the official Commission forecast.

Commission forecasts are not characterised by excessive optimism. The modest recovery predicted last autumn has turned out as expected, with the forecast of 1.6% growth in the Community in 1996 confirmed by the data, which also supports the view taken of further strengthening over the forecasting horizon. The forecast for 1997 has been revised up slightly to 2.4% (from 2.3% in the autumn forecast) rising to 2.8% in 1998 (unchanged). On the public finances, the Commission forecasts assume budget measures will be fully implemented. This is a realistic assumption given the determination displayed by governments to control deficits.

For Portugal, the latest data suggest that GDP growth in 1996 of an estimated 3.0% was stronger than expected by the Commission last autumn (2.5%) and recent indicators point to a further strengthening over the forecasting period to 3.2% in 1997 (revised up from 2.8% last autumn) and 3.5% in 1998 (revised up from 3.2%). The latest forecasts published by the IMF are slightly more optimistic. They expect growth in Portugal to reach 3.3% in 1997, and 3.5% in 1998. In 1997 they are forecasting a fall in the public sector deficit to 2.9% of GDP. This compares with the Commission forecasts of 3.0% for 1997 and 2.9% for 1998.

Based on past experience, the Commission's track record of forecasting accuracy compares well with other organisations. Moreover, the markets appear to concur with the Commission's estimate of strengthening growth accompanied by economic and financial convergence in the run-up to economic and monetary union (EMU) with stable exchange rates, a decline in interest rate spreads and inflation converging to low levels in the Community.

The Commission's forecasts are made under the usual procedure. Trends in recorded data are examined, and a forward looking picture is put together through the assessment of a variety of factors such as government policy measures, business and consumer surveys, and assumed developments in the external climate. The impact of these various factors can be scientifically estimated on the basis of past experience, but in a forward looking exercise uncertainty clearly exists. Thus the forecasts are widely discussed within the Commission and with national experts. The Commission's final forecasts are central estimates, given the prevailing circumstances. Clearly if any of the assumptions change, for example concerning government policy, the likely outcome will also change.