SCOTLAND'S forecast economic growth has been revised down due to soaring levels of inflation and uncertainties over the war in Ukraine.
The latest quarterly economic commentary from the Fraser of Allander Institute at the University of Strathclyde has forecast a growth of 3.5 per cent in 2022 and 1.5% next year.
The outlook has significantly worsened for 2022 since the last set of forecasts drawn up in December predicted 4.7% growth this year.
The commentary examines all of the latest data on the global, UK and Scottish economies, including detailed analysis of the latest GDP, employment and inflation figures.
Two years on from the first Covid lockdown, the latest data shows that the Scottish economy has just recovered to pre-pandemic levels. But experts have warned this overall picture hides a disparate sectoral story, with hospitality and leisure businesses still operating significantly below pre-pandemic levels of trading.
The analysis shows that consumers are starting to feel the pinch in the cost-of-living crisis, with many noticing increases in their food shopping, their energy bills, and the cost of fuel. This picture is before the expected increases in April as the energy price cap moves up further.
Director of the Fraser of Allander Institute, Professor Mairi Spowage, said: “The measures introduced by the Chancellor’s spring statement are not likely to be sufficiently targeted to help those on the lowest incomes. Consumers and businesses are going to feel the squeeze in the coming months, if they haven’t already, with soaring energy and food bills.
“This has the potential to limit the economic recovery we hope to see during 2022, as consumers cut back on discretionary spending, and even perhaps businesses limit production due to input costs.
“These circumstances have led us to revise down our expectations for growth during 2022. Of course – and we feel like we have said this a lot over the last two years – Economic forecasting is a tricky business at the best of times, but forecasts are highly uncertain right now.”
A Scottish Government spokesman said: “The Scottish Government recognises that some sectors remain fragile as we recover from the pandemic, and we are focused on working with businesses to invest in growth.
“We are doing all we can to ensure people, communities and businesses are given as much support as possible to deal with the rising cost of living.
“Most of the powers required to tackle these issues are reserved to the UK Government, which is why the Finance Secretary wrote to the Chancellor of the Exchequer, urging him to take much needed action in his spring statement.
“We are committed to supporting our businesses recovery and have provided more than £4.5 billion in support since the beginning of the pandemic, including £1.6 billion in rates relief – the most generous of the UK administrations.”
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