The Scottish economy is set to recover to pre-pandemic levels three months earlier than previously thought.
This is according to the latest quarterly Economic Commentary from the Fraser of Allander Institute, which predicts growth of 6.5% in 2021 and 4.8% in 2022. The economy is now predicted to get back to pre-pandemic levels in April 2022.
Despite growth contracting slightly in July, mainly due to a fall in renewable electricity production, growth was significantly faster during Q2 than expected, leading to forecasts for 2021 and 2022 being revised up.
In the Deloitte-sponsored Economic commentary, the University of Strathclyde research institute discusses a number of risks that threaten recovery.
Today is the last day of the Job Retention Scheme, which has been pivotal in supporting household incomes and businesses since March 2020. How many of the currently furloughed workers will become unemployed or unable to secure the type and level of work they want is unknown.
This uncertainty coincides with the cancellation of the Universal Credit uplift which will bring additional financial hardship to around half a million families in Scotland.
As well as the risk of joblessness, labour shortages are becoming clear in many sectors, threatening goods shortages and adding to wider inflationary risks.
Consumer confidence, so important for the improvement in outlook over the last six months, could start to wane as prices across the economy rise.
As the economy moves, however uncertainly, into a new phase, policy focus turns towards dealing with the climate emergency. COP26 in Glasgow in November is seen as the last chance for world leaders to make the step change needed to halt the most harmful form of climate change.
In this edition of the Commentary, the research institute analyses the latest data about energy use in the UK, progress towards climate change targets, and progress on wider environmental outcomes, to provide context for COP26.
There is also analysis of business plans and ambition to achieve corporate net zero targets.
This quarter’s commentary also includes:
- A review of Real Time Indicators, giving the most up to date snapshot of the Scottish economy;
- Analysis of farming and climate change; and,
- Discussion of the role of economics in climate change policy.
This quarter’s commentary also includes two perspectives:
- The Economic Impact of Scotland’s Renewable Energy Sector, James Black, Fraser of Allander Institute
- Financial Firms and Climate Risk Assessment, Callum McGrath, University of Edinburgh