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FAI Economic Commentary, 2020 Q2

The Scottish economy is now in its deepest recession in living memory, according to the latest Economic Commentary by the Fraser of Allander Institute at the University of Strathclyde.

The Institute points out that whilst the depth of the collapse in GDP is largely artificial and entirely due to the lockdown, what matters is how quickly activity bounces back once the restrictions are lifted.

All signs are however, that there will be some scarring and it will take some time before the economy recovers to a ‘new normal’.

The Commentary considers a range of scenarios from a more optimistic scenario where confidence builds momentum, through to a more pessimistic scenario which includes a second wave of infection.

In the optimistic scenario, the economy is projected to take until the end of 2021, at the earliest, to fully recover lost output. In the pessimistic scenario, it could be 2024 before a ‘new normal’ is reached.

The Institute also points out that even when the economy returns to growth, the underlying structure of Scotland’s business base will be altered forever.

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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.