SCOTLAND’S economy will take the best part of two years to rebound from the coronavirus crisis and could take four years, the country’s leading economic thinktank warns today.

The Fraser of Allander Institute said Scotland was now in its “deepest recession in living memory” and the outlook was “hugely challenging”.

In its latest economic commentary, the Institute said that even under its “optimistic” scenario of continued Covid decline and an economic upturn, the economy would not return to pre-pandemic levels until late 2021 or early 2022.

However if the crisis dragged on, and especially if there was a second wave of infections and a return to lockdown, it would be the biggest hit to livelihoods in a generation.

READ MORE: The revolutionary new vision for a post-Covid Scottish economy

“We estimate that this could mean the economy does not get back to pre-crisis levels until mid-2024,” the Strathclyde University outfit said.

The Institute said that, while the 23 per cent collapse in Scottish GDP since the outbreak was “largely artificial and entirely due to the lockdown”, it would alter the country’s business base forever.

Director Professor Graeme Roy said: “The near 20% drop in economic activity in April for Scotland highlights the scale of the economic crisis that we face.

“So far, as a result of the major government support initiatives that have been put in place – including around 750,000 employees furloughed or supported through the self-employment scheme – the impact of the full effects of the crisis have been dampened.

“Sadly, it is only now once we start to switch the economy back on that the crisis will hit home with a raft of redundancies and business closures likely over the summer.

“In looking to the future, there is one important take-away from all this. Yes, there are debates to be had about the nature of growth, how it is distributed, and its sustainability.

“But the importance of a prosperous economy for our collective ‘wellbeing’ – one that provides financial security for families, creates opportunities for our young people and supports innovative and vibrant businesses – cannot be overestimated.”

The Institute said there was need for urgent, short-term action from politicians, not reheated old ideas about the long-term.

It said that crucial to the recovery would be avoiding a second wave, making the lack of a large-scale test and trace system “a concern”.

The safe return of schools, and parents returning to work, was also highlighted, as were a careful end to state support for businesses and reinvigorated consumer demand.

Steve Williams, Senior Partner for Scotland at Deloitte, said: “Covid-19 has presented businesses with their most significant and unpredictable challenges in decades, with wide reaching economic and societal implications of lockdown changing life as we know it.

“For the majority of organisations and consumers, the lockdown on non-essential parts of the global economy has left a scar on finances, with businesses and some individuals likely to emerge with a combination of higher debt and weaker financial reserves.

“What’s crucial, and as this commentary sets out, is that we give our economy the best chance of recovering quickly so that inequalities are not simply left to grow. Businesses across all sectors have a key role to play; they must be flexible and willing to innovative as the country adjusts to a lower growth world. Leaders must use this time to think about the organisation they want to be in the future. We must take this opportunity to change businesses for the better.”

READ MORE: Sturgeon expert warns Scottish economy to be 'worst in developed world'

At Holyrood last night, SNP MSP Alex Neil said ministers should spend an extra £7bn over the next year “to be able to recover from the post-Covid economic crisis”.

The former health secretary said the Scottish Government should be able to borrow directly from the Bank of England “on exactly the same terms and conditions as the UK Government”.

He said the existing fiscal framework should be thrown “out the window.”

Mr Neil made the comments during a Holyrood debate on Scotland’s economic recovery.

Scottish Labour leader Richard Leonard said more must be done to light a “burning flame of hope” for a better Scotland.

However he welcomed proposals to guarantee secure jobs for young Scots for at least two years.