It is becoming more and more difficult to know what to cover in a monthly column on the economy.

In principle there should be oodles of material.

After all, we have just had a really crucial Scottish Budget.

Then the Brexit story is still playing out –and will do for many moons.

The prospect of another independence referendum hangs over us, preceded by a key election for the Holyrood Parliament.

There are major issues to be dealt with related to both climate change, with a truly critical global conference due later this year in Glasgow, and the distribution of wealth and wellbeing across Scotland.

And then there is the small matter of continuing disappointment in Scottish productivity growth which imposes a continuing constraint on achieving all targets for prosperity.

But taking precedence on all of these is the small matter of a pandemic and the major uncertainty as to when everything –including the economy – can start to get back towards business as usual. Nobody knows, so we must simply do the best we can to cope with where we are and prepare for where we expect to be as the story unwinds and what then will need to be prioritised.

So where are we on the economy? The best estimates and forecasts come from the Scottish Fiscal Commission (which provides the data that the Scottish Government has to use in its Budget) and of course the Fraser of Allander Institute.

In a report issued for last week’s Budget, the SFC expects the Scottish economy (in terms of gross domestic product) to have declined by some 11 per cent last year, with the decline continuing into Q1 2021 when it anticipates a further fall of 5%.

This is broadly in line with other forecasts for Scotland and for the UK. The EY ITEM Club estimates that UK GDP fell by 10.1% in 2020 – an improvement (sic) from its estimate a month or so back of -11.6%. It forecasts a further UK decline of 3% to 4% in Q1 this year.

The UK and Scottish declines do not make happy reading when set in an international context.

It is estimated that the fall in US GDP may have been the largest since way back post-war in 1946, but it is still put at a mere 3.5%, one-third of the UK and Scottish figures; and with expectations of some growth in the early months of this year.

The great hope now is that, as the vaccine rollout continues, more and more activity can be allowed to reopen from some time in the second quarter of this year.

However, we should be aware of the uncertainties that remain; and not expect any massive and rapid rebound to past heights.

The SFC forecasts GDP growth of just 1.6% this year, then rising to 7.5% next; but with activity not returning to pre-pandemic levels until 2024.

In the early days of Covid, some economists were forecasting a “V” shaped recovery, implying a rapid and robust bounce back; or perhaps a still-encouraging but a touch more cautious “U” shape.

Sadly we remain, for the economy as a whole, on the downward slope of whatever letter you choose to characterise the movement of our economy as a whole – and the eventual slope upwards is set to be much gentler than the slope down.

As the Fraser of Allander Institute has emphasised for some months now, the trajectory has been and will be very different for varying sectors of the economy. Hence their reference to a “K” shape – with some sectors bouncing back speedily and others continuing to edge downwards for some time to come. For example, in the present lockdown both manufacturing and construction are open and operating, whereas large chunks of the service sector remain shut, bolted and barred.

This “K” shape also applies to how consumers can be expected to respond as normality returns.

As the SFC has spelt out, most higher-income consumers will have piled on the savings during lockdown, and be set to spend, spend, spend when circumstances permit.

At the other end of the consumer spectrum, SFC note that lower-income households have been “disproportionately affected” by Covid-19.

They are more likely to have lost jobs or substantial chunks of income, causing them to “run down savings or [borrow] to cover day-to-day expenses”. Their pick-up in consumption will be slow and uncertain – especially given the anticipated rise in unemployment, expected by the SFC to peak at 7.5% in the middle of this year.

Scottish Finance Secretary Kate Forbes did respond to some of these concerns about differential impacts by business sector and income group; hence the extension of rates relief until mid-year for tourism, retail and hospitality; and the encouragement to local authorities to freeze council tax. (Although Emma Congreve at FAI argues very persuasively that this action on council tax is a very cost-inefficient means of redistributing incomes.)

But we should see this Budget as just the start of a process of re-setting Scottish fiscal and economic policy.

Much more will be needed to deal with the pandemic’s differential impact.

The SFC is anticipating another decline in productivity, due in part to the “scarring effects from prolonged unemployment”.

It also sees employment rates falling, in part because “the long-term employability of younger people may be reduced by unemployment early in their working lives”.

And we must also expect long-term effects from the significant interruptions to schooling and tertiary education.

Offsetting these adverse effects will require thoughtful policies and significant funding. The key watchword must be re-balancing as much as recovery.