Also, recovery in Scotland in coming years will be much slower than that UK-wide, as the economy north of the Border is hit particularly hard by swingeing cuts to public spending.
Strathclyde University’s Fraser of Allander Institute blames the deeper recession in Scotland mainly on a bigger drop in the output of its financial sector.
It also highlights a significant danger that the Scottish economy will still not achieve growth in the fourth quarter, confounding earlier predictions.
Last night the stark assessment sparked an exchange between the political parties about whether enough was being done to stimulate the economy.
Finance Secretary John Swinney said the report showed there were grounds for “cautious optimism”, though any economic recovery was “fragile at this stage”.
However, Scottish Labour leader Iain Gray warned it painted a “worrying picture” for Scotland and blamed the weak recovery on the SNP Government.
Presenting the latest commentary yesterday, Professor Brian Ashcroft noted that 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, he pointed out.
Referring to the deeper Scottish recession, Professor Ashcroft said: “This hasn’t happened before, certainly since the Second World War, in terms of the output loss being greater in Scotland than the rest of the UK.
“That is because of the nature of the recession – the financial services crisis. There has been a significant cutback in financial services activity.”
The Fraser of Allander Instititute now forecasts a much greater rise in unemployment in Scotland this year than it did in its previous forecasts in June.
Its central forecast is that there will be net job losses of 130,776 this year, much higher than the 84,399 forecast in its June commentary. However, it has cut its forecast of the number of net job losses in 2010 from 51,451 in June to 29,615.
Looking ahead, it predicts the Scottish economy will grow by just 0.1% next year. The IMF is forecasting UK-wide growth of 0.9% in 2010.
The institute further forecasts that the Scottish economy will grow by 1.1% in 2011 and by 1.6% in 2012, still well below its average annual long-term trend rate of growth of 2%.
Mr Swinney said: “The Scottish Government’s economic recovery plan is making a real difference by helping businesses and households across Scotland and supporting some 15,000 jobs, but if we are to deliver a strong and quick recovery then we must continue to invest.”
Mr Gray said: “The decision to cancel the Glasgow Airport Rail Link (Garl) is an example of how they get it wrong. Garl alone will cost 1300 jobs. It also puts Scottish business at a disadvantage to our competitors.”
Tory finance spokesman Derek Brownlee said he hoped the prediction that Scotland was emerging from recession was true, while LibDem leader Tavish Scott said the report showed that Labour handling of the “banking shambles” was a key reason for Scotland being hit so hard by the recession.
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