Chaired by Graeme Roy
Chaired by Graeme Roy
The coronavirus outbreak has already led to a sharp economic downturn in Scotland; one that will undoubtedly change the shape of our economy in the long-run, according to the Fraser of Allander Institute.
In its latest Economic Commentary, the Institute says the virus outbreak represents an ‘unprecedented shock’ to the global economy that will trigger a recession, but that the collective efforts of business and policymakers is to ensure that this is – as much as possible – a ‘v-shaped’ recession, with activity picking-up once the public health crisis passes.
It is a highly uncertain time for the global economy, with the increasing spread of Coronavirus (COVID19).
We’ve been asked by a number of people about the effect on the Scottish economy of COVID19. At this stage, it is difficult to tell how large the effect on economic activity in Scotland is or will be. In particular, given the significant uncertainty about the scale of the impact and in turn the government response.
On the wider issue of the impact on the global economy, there have been a number of interesting blogs. Rather than repeat the argument here, we would suggest reading Simon Wren Lewis’s blog on this here, a blog from the World Economic Forum here, this piece on The Conversation, and of course Nobel Laureate Paul Krugman in the New York Times.
Global pandemic fears notwithstanding, and in honour of tradition, we’ve produced updated nowcasts for the Scottish economy.
This week we received new data on UK GDP growth in Q4, which came in at a disappointing 0.0%.
Some of this was clearly due to Brexit uncertainty, but there are clearly other factors on the go this time around. For example, rather than rising significantly as per the previous pre-Brexit deadline in March 2019, manufacturing activity fell tipping that sector into recession. Continuing a consistent trend in recent years, business investment was weak once again, falling by 1% in the final quarter of the year.
Weaker global growth and a relatively fragile period for consumer confidence appear to be just as important explanations as any Brexit-induced uncertainty.
You can read the full Business Monitor here.
|Q4 2019||3-year average||Change over quarter||Change over year|
|FAI Business Activity Index (net % balance*)||5||8||0||-5 ▼|
|New Business||2||9||-1 ▼||-8 ▼|
|Turnover||4||9||-4 ▼||-9 ▼|
|Costs||63||54||7 ▲||8 ▲|
|New Capital Investment||-9||-7||-6 ▼||-5 ▼|
|Export Activity||-11||0||-3 ▼||-5 ▼|
Our principal indicator of activity – the FAI Business Activity Index – remained unchanged this quarter, and just below its three-year average.Continue reading