THE Scottish economy will decline through most of this year, with a “challenging period to come in the spring for consumers and businesses” as the UK Government’s support for energy bills is rolled back, a leading think-tank says.
In its latest Deloitte-sponsored commentary, published today, Fraser of Allander forecasts the Scottish economy will shrink by 1% over 2023 as a whole, before returning to growth next year with expansion of 0.6%.
It notes these forecasts represent a “slight revision down” from its projections in October, highlighting in this context the challenging period it predicts for households and businesses in the spring.
Fraser of Allander believes there will have been “slight growth” in Scotland in the final quarter of 2022, after a dip in gross domestic product in the third quarter of last year. It expects this growth in the final three months of last year will be followed by three quarters of contraction in 2023.
The think-tank predicts growth will return in the final quarter of 2023, “bringing an end to a three-quarter-long recession”.
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Fraser of Allander director Mairi Spowage said: “High inflation is continuing to impact the outlook for the economy, and we still expect that there is likely to be contraction...during the first three quarters of 2023. This means that the economy will be smaller at the end of 2023 than at the start of the year.”
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She added: “More positively, we agree with many other forecasters that there is likely to be growth in the economy towards the end of the year as inflation comes down. However, we need to remember that this only means that prices stop rising quite as quickly: it does not mean that prices will start to fall. Things are likely to remain difficult for households throughout 2023.
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“The outlook, though, is exceedingly uncertain, and there are a number of risks to the forecasts – many of which are to the downside.”
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