AN influential Scottish economic think tank has further slashed its forecasts for growth and predicted unemployment will rise as it declares the Coalition Government's austerity policies have severely dented growth.

The Fraser of Allander Institute at Strathclyde University now expects Scottish gross domestic product (GDP) will increase by just 0.9% in 2013 and 1.7% next year.

Experts at the institute predict another 24,000 people will join the dole queue in Scotland in 2012 and 2013 amid an anaemic recovery from the slowdown that followed the global financial meltdown in 2008.

In its economic commentary, produced in association with PwC, Fraser of Allander welcomed signs of genuine growth in the third quarter of 2012.

But it estimated GDP had fallen by 0.1% annually in Scotland in 2012, a "little weaker" performance than the UK.

The institute predicted the growth rate will increase to 1.9% in 2015, as "recovery finally, and hopefully, takes hold", in line with the trend of around 2%.

However, Brian Ashcroft, Emeritus Professor of Economics at the University of Strathclyde, said: "Growth should be a lot higher than it is given we are now five years on from the start of the great recession."

The commentary notes Scotland is grappling with a mixture of challenges, including weak household spending and problems in the eurozone.

Paul Brewer of PwC said: "Aside from the notable exception of the oil and gas sector, overall investment levels in Scotland are still weak."

But Professor Ashcroft said the Coalition Government must shoulder a significant part of the blame, for its austerity policies, which have involved deep cuts in public spending on both sides of the Border. He said: "The austerity has severely lowered growth and tax revenue prospects as affirmed by the International Monetary Fund."

With the full impact of proposed spending cuts yet to be felt, Professor Ashcroft urged George Osborne to change tack in the Budget on March 20.

He said the Chancellor should slow the pace of fiscal consolidation, and undertake a massive infrastructure investment programme to capitalise on the fact the UK can borrow at cheap rates.

Professor Ashcroft believes this could provide the kind of boost to demand and jobs that helped the US economy return to pre-recession output levels by the third quarter of 2011, after President Barack Obama maintained spending.

Fraser of Allander expects the Scottish economy will only recover to pre-recession levels in the third quarter of 2014.

Weeks after the UK lost the Triple A credit rating prized by the Chancellor, Professor Ashcroft said: "We have no need to worry about losing our Triple A rating. Japan did; America did; France did. It had no impact on their borrowing costs."

Professor Aschcroft also reiterated calls for the UK Government to increase benefits rather than proceed with planned cuts. "I think it's a great mistake, for macro-economic reasons, because people who receive benefits spend all they get."

He said the Scottish Government had done "pretty well" in trying to boost activity in Scotland by switching resources into capital projects in areas like infrastructure.

However, an independent Scotland would probably have to conduct a fiscal consolidation programme.

"The Scottish Government would carry a lot of debt as a consequence of the bank bailouts," said Professor Ashcroft

He added: "It's highly probable the Scottish Government would have to pay more for its debt (than the UK). They would have to cut back more rapidly."

In November, the institute cut its forecast for growth in Scotland in 2013 to 1.3%, from 1.6%. It reduced the estimate for 2014 to 2.2% from 2.5%.

It expects ILO unemployment to increase from 204,050 at the end of 2012, to 218,300 at end 2013 and 228,500 in 2014.

The unemployment rate will increase to 8.6% from 7.8% over that period. Unemployment will fall to 204,100 in 2015, leaving the rate at 7.7%.

l The British Chambers of Commerce has cut its forecasts for growth in UK GDP this year to 0.6% from 1%.