Forecast discrepancy caused by 'imprecise' projections - Lenihan

DISCREPANCIES THAT have emerged between EU and Irish growth figures are the result of “imprecise” forecasting, Minister for Finance Brian Lenihan said in Brussels yesterday.

Ahead of a meeting of euro zone finance ministers, he defended the differences, which became evident after the publication of the European Commission’s spring growth estimates earlier in the day.

“The science of economic forecasting at present is very imprecise,” he said. “It is like forecasting the weather. You have such a variety of forecasts. The reality is, we share a common analysis.”

Finance ministers from the 16 countries using the euro were meeting in Brussels to go over the estimates, which predicted Ireland’s budgetary shortfall would reach 12 per cent of GDP in 2009, the highest in the EU.

The Government, in several exchanges with the commission, had promised to keep the deficit down to 9.5 per cent this year, but said after the release of the supplementary Budget on April 7th that it had risen to 10.75 per cent.

The Government must reduce its general deficit to 3 per cent of GDP by 2013 to comply with the EU’s stability and growth pact.

Mr Lenihan was also facing his euro zone counterparts to defend the supplementary Budget, which has already garnered praise from Luxembourg’s prime minister, Jean-Claude Juncker.

On his way into the meeting, Mr Juncker, who presides over the Eurogroup, said: “I do think that the Irish Government, with great courage and a deep sense of responsibility, are on the way to taking the right step in a very difficult situation.”

He added that Ireland was “behaving in the right way”.

EU and Irish unemployment figures also diverge, with the commission forecasting the Irish jobless rate will be 13.3 per cent in 2009 (16 per cent in 2010), almost two percentage points higher than the latest CSO figures.

Ireland comes second only to the three Baltic states on the EU’s scale of GDP slumps.

“Yes, in terms of the economy, the figures are very bleak,” Mr Lenihan said. “But we are taking the correct action for a better future. That is the clear message from the commission.”

The European Commission’s prediction that Ireland will have the biggest budget gap in Europe this year is a damning indictment of the Government, according to Fine Gael deputy leader and finance spokesman Richard Bruton.

“This bleak forecast confirms the ESRI’s pessimistic outlook for the economy, and confirms that the Government’s April forecast for the public finances is once again off track,” said Mr Bruton.

He said the country needed a new government with new ideas to slow the decline in the economy.

“The recession is a direct result of Fianna Fáil’s discredited policies and its deliberate stoking of the debt-fuelled housing bubble. The human cost of this failure is all too evident in the thousands joining the dole queues every week, the businesses and shops going out of business, and the enormous damage being done to families and society.”