These latest forecasts from the Paris-based OECD, when compared with projections this week for Scotland from Strathclyde University’s respected Fraser of Allander Institute, underline the likelihood that economic recovery will be much weaker north of the border than UK-wide.
Fraser of Allander this week forecast the Scottish economy would expand by just 0.1% in 2010, before expanding by 1.1% in 2011 and 1.6% in 2012, with growth throughout this period remaining way below Scotland’s long-term annual trend rate of about 2%.
In its latest World Economic Outlook, the OECD highlights the need in the UK for firm plans to cut public spending or raise taxes, or both.
The economic research agency said: “The weak fiscal position makes further consolidation necessary. An announcement of concrete and comprehensive consolidation plans up front would enhance macroeconomic stability.”
Fraser of Allander said this week that Scotland will almost certainly suffer a deeper recession than the UK as a whole for the first time since the Second World War.
It noted Scottish economic output had dropped by 6% over the four quarters ending June 30. In the UK as a whole, the fall had been 5.8% in the five quarters to June 30. The UK recession started one quarter before that in Scotland.
The OECD is forecasting that UK economic output in 2009 will be down 4.7% on last year.
Fraser of Allander projects that the Scottish economy will this year suffer contraction of 5%.
The OECD is forecasting that the UK unemployment rate, on the International Labour Organisation measure, will rise to 9.3% in 2010 and to 9.5% in 2011. Data from the Office for National Statistics shows UK unemployment stood at 2.46 million on the ILO measure in the July to September period -- a rate of 7.8%.
Fraser of Allander forecasts that the ILO unemployment rate in Scotland will peak at 9.2% next year.
The OECD had forecast back in June that the UK economy would contract by 4.3% this year and stagnate in 2010. It is projecting a steeper decline this year, but now expects meaningful growth in 2010.
The OECD is forecasting the US will enjoy a much stronger recovery than the UK -- predicting output in the world’s largest economy will increase by 2.5% in 2010 and 2.8% in 2011.
For the 16-nation eurozone, the OECD is predicting growth of 0.9% in 2010 and expansion of 1.7% in 2011.
While the projected growth rates are lower for the single currency bloc than the UK, the OECD expects the eurozone to contract by 4% this year. This is significantly less steep than the decline it is forecasting in the UK in 2009 as a whole.
Official data shows that the eurozone has emerged from recession in the third quarter. The UK remained in recession in the three months to September, with a further 0.4% decline in gross domestic product.
The Bank of England is forecasting growth of about 2.2% in the UK in 2010, and expansion of 4.1% in 2011.
In his Budget in April, Chancellor Alistair Darling predicted the UK economy would expand by 1.25% in 2010 and by 3.5% in 2011.
Darling forecast at that stage that the UK economy would contract by 3.5% this year -- a projection which now appears to have been over-optimistic.
The International Monetary Fund is forecasting the UK economy will contract by 4.4% this year, before expanding by 0.9% in 2010.¶
