Cliff Taylor: Greater uncertainty is the only thing we can predict about 2017

“It’s tough to make predictions, particularly about the future.” So goes one of the quotes attributed to the baseball legend Yogi Berra.

The 1950s Yankees hero was a sportswriters' dream, though no one is sure which of the multitude of quotes attributed to him are actually his.

As he said himself: “I never said most of the things I said.”

Rarely has a year proved the danger of predictions so conclusively. From Brexit to Donald Trump, few foresaw what the year was going to bring – and when the big events happened, the consensus view of what it would mean for economies, currency prices and the stock market was pretty much completely wrong.

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“In baseball, you don’t know nothing,” was another Berra saying, and it seems much the same applies to the world of geopolitics and the economic fallout.

The Brexit vote did lead to a fall in sterling, but markets soon calmed and the predicted collapse of the currency and of UK consumer spending has simply not appeared.

The latest UK economic figures show that the economy expanded at the same rate after the vote as it did beforehand.

Meanwhile, the anticipated market collapse on the election of Donald Trump turned, instead, into a big rally for the US dollar and equity markets, the so-called “Trumpflation” trade.

Markets and spin

In our so-called “post-truth” world, are the markets believing the spin that Brexit won’t be so bad and that Trump can boost US growth and inflation? Or will it be the case, as so often in the past, that things just continue to muddle along, defying predictions of huge upheavals?

The uncertainties do look greater than normal. The big events of 2016 were always going to play out over years rather than months, and the range of possible outcomes is wide.

For, say, a senior Irish Government official or a businesswoman running a food-exporting firm, how can preparations be made for Brexit when it is increasingly clear that the British government itself is flying blind, with no plan and what appears to be a complete misjudgment of its negotiating power?

This was the year of just getting on with it, of consumers and businesses taking a commonsense approach to all that was thrown at them. Will 2017 test the muddle-through method?

The Brexit talks are due to get under way in earnest and governments, businesses and investors will start to focus forensically on what might result. It is unlikely to be pretty. Trump will take office, and will start actually having to do things rather than just talk about them.

But predicting that Brexit, Trump and the rest will cause upheaval in 2017 – when everyone was so wrong this year – seems a bit pointless. It feels like saying that all the original predictions were really correct but things are just taking a bit longer to play out than expected.

Perhaps it would be better to accept the Berra theory that we all “know nothing” and just watch how it all pans out. “You can,” as he said, “observe a lot by just watching.”

Against this backdrop, you would wonder about the sense in continuing to accept economic forecasts as valuable additions to the debate.

When the Government or the ESRI comes out and tell us that the economy is likely to grow by 3 per cent plus each year for the next few years, the media is all over it. But predictions are only as good as the assumptions they are based on.

True, the ESRI in particular was careful in its recent medium-term forecasts to outline a range of different scenarios.

And this is surely the way to go. This can provide useful information for government planners, businesses and so on as events play out.

Baseline

The tricky bit, however, is judging what the baseline is going to be. Most forecasts see the Irish economy growing by 3 per cent plus each year for the next four or five years.

But look back at recent history and you see that our economy tends to either boom or bust. We have recorded a growth rate of about 3 per cent in just two of the past 20 years.

The rest were mostly either above 4 per cent, or very low growth, or recession.

So forecasting that Irish economic life can finally move into a new era of steady and sustainable growth means that we are going to see a break with the past.

Fair enough for Taoiseach Enda Kenny to state confidently that the Government will have enough cash to cut the universal social charge and increase pensions again in the next budget.

But we do surely have to move towards a more sophisticated way of planning what we do with public money, and of preparing for the various scenarios that could emerge.

Planning everything on the basis of a 3 per cent plus growth rate every year risks leaving us unprepared if trouble does hit.

And if it doesn’t, and the cash is there, then of course we need to plan for how to use it.

In the meantime, it is probably best not to take the seasonal promises from politicians or the predictions from pundits too seriously.

Looking at 2017 in particular, the range of possible outcomes is very wide, framed by factors as diverse as whether Britain can plot a calm way to move out of the EU, to what Donald Trump does with multinational tax and trade.

Best probably to use one last Berra quote, which all of us pundits could live by after 2016: “If you ask me anything I don’t know, I’m not going to answer.”