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FAI Economic Commentary, 2020 Q3

The Scottish economy is at a key crossroads in its recovery from the COVID-19 pandemic, with the outlook particularly uncertain, according to the latest Economic Commentary by the Fraser of Allander Institute at the University of Strathclyde.

The Institute points out that whilst a fragile recovery is underway, the economy is still well below levels of activity that we had before the start of the crisis.

On the upside, provided that the virus is contained, we could see growth continue to pick up as consumers and businesses gain confidence. However, even in this scenario, it is likely to be a slow recovery with the economy not returning to normal until a vaccine is rolled out at scale.

There are however many reasons to be much more pessimistic. The new restrictions, due to the surge in cases in recent weeks, are likely to further constrain the rate of growth. Many businesses who were already operating under significant stress are likely to suffer further under these new restrictions. With the scaling back of government support in the next few weeks, many of the negative economic effects of the crisis – some which have been hidden through initiatives such as the furlough scheme, the business bounce back loans and mortgage holidays – are likely to escalate.

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The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.

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Founded in 1975, the Fraser of Allander Economic Commentary is the leading publication on the Scottish economy and offers an authoritative and independent analysis of the key issues of the day.