How Accurate are Macroeconomic and Fiscal Forecasts?

The quality of fiscal forecasts in 1999-2005 is examined. Substantial and systematic error in the key macroeconomic and fiscal forecasts is found. Independent forecasts generally prove to be even less accurate. One can conclude that fiscal planning was not based on conservative approach, envisaging purposeful underestimation of budget revenues. Full effect of erroneous prediction of external variables is calculated, taking into account direct, indirect impact, and implicit influence of stabilization measures by the government and the Central Bank. We find that shifts in exchange rate and inflation in response to increase in oil and gas prices set limits to spending windfall gains, as either the budget looses revenues due to the ruble appreciation or outlays are deflated with price growth.