GN-PBO Ottawa, Canada June 11, 2015 Kevin Page Jean-Luc Pepin Research Chair University of Ottawa Considerations on Forecasting for PBOs

Outline 1.Why Examine Economic and Fiscal Forecasts 1.Different Options for PBOs 1.Canadian Experience 2.Considerations on Approach

Why Examine Economic and Fiscal Forecasts  Many PBOs have an explicit legislative mandate to examine economic and fiscal trends in their country  Fundamental Considerations –Economic and fiscal projections underpin decisions on government priorities and policies Legislators may need additional information and analysis to debate priorities and policies –Poor projections influenced by biased perspectives can create difficult problems for trust, public policy and fiscal sustainability

Different Options for PBOs Option 1 Prepare independent projections Requirements -models and data (build, rent, contract out) Pros - In house expertise will support budget analysis Cons - Significant commitment Option 2 Assess government projections Requirements -Tests of reasonableness -Analysis of uncertainty & sensitivity Pros - Low cost with potential high value Cons - Depth of analysis is limited

Canadian Experience  Independent analysis of economic trends and fiscal outlook is part of the legislative mandate  Evolutionary approach –Rent models and data –Build in-house models and expand analysis Move from “average” private sector economic forecasts to independent PBO economic forecasts Add analysis on output gaps and cyclically adjusted budget balance Add analysis on fiscal sustainability

Considerations on Approach 1)Legislative Mandate 2)Budgetary Challenges of the Country 3)Budget of PBO 4)Access to Expertise (Models & Data)

Thank-you Jean-Luc Pepin Research Chair University of Ottawa, Canada Faculty of Social Sciences x