Chief Economist – State of the Economy
The outlook for the Scottish economy is one of continued recovery but with growth below both trend and initial expectations.
Scotland is likely to continue to track the trends at the UK level as many of the determinants of UK growth – deleveraging, fiscal consolidation and the Euro crisis – are shared in Scotland.
Assuming a gradual resolution to the Euro crisis we expect growth to be fragile through 2012 before picking up in 2013 and returning to pre-recession levels at some point in 2014.
It’s also likely that variations within sectors will continue – with manufacturing, whisky and renewable energy expected to continue their recent strong performance, but others such as construction, likely to remain fragile.
While conditions remaining challenging and there are clearly some significant headwinds, there are also some positive opportunities that could help the recovery.
If the situation in the Euro Area improves, then the boost to confidence and trade that would follow could help stimulate faster growth. As deleveraging continues, consumer spending could be helped by falling inflation. And if overall confidence in the economy can be improved this could help unlock the surpluses that many large private sector companies have built up in recent years.
From our analysis, it’s clear that the next few months could prove to be a pivotal time in the global recovery and our prospects for a return to sustained and stable levels of growth and employment creation.
The full State of the Economy report is available on the Scottish Government website.