4.2. Prudent Economic Assumptions

Deviations from the forecast of the key economic assumption underlying the budget are the government’s key fiscal risk. There is no single factor more responsible for “derailing” fiscal consolidation programmes than the use of incorrect economic assumptions. Great care must be taken in making them and all key economic assumptions should be disclosed explicitly. The establishment of an independent body to recommend the economic assumptions to be used in the budget may be considered as well. All this serves to place safeguards against the use of unrealistic, or “optimistic,” economic assumptions.