'No growth' for Scottish economy next year
November 18, 2009 - 0:0
The Scottish economy is forecast to achieve almost no growth during 2010, according to the most recent analysis from Strathclyde University.
The Fraser of Allander Institute said Scotland would recover from recession more weakly than the rest of the UK.It said this was because of the larger public sector north of the border.
The country's economy is predicted to face a dip of at least one more quarter of contraction in 2009, and possibly two -- meaning a return to recession.
The institute said unemployment was likely to peak next year at 234,000 - 40,000 more than the most recent figure.
The number of people on Jobseekers Allowance would rise from the October figure of 134,000 to 160,000 during next year, it said.
They warned the economy north of the border may also be more exposed to difficulties in export markets than the English economy.
The service sector -- mainly financial services, real estate and business services -- has performed poorly in recent months.
While manufacturing is seen as offering the best signs of recovery, the report said: “We remain concerned that Scottish manufacturing has the size, diversity and capability to take full advantage of a lower exchange rate and the recovery of global demand.”
It also noted that Scots were more likely than others in Britain to save, and that could hamper a return to growth.
And with two dominant and troubled banks trying to stabilize their finances and therefore less willing to lend, it said that could also constrain Scottish businesses.
The Fraser of Allander report offers three forecasts, based on higher, moderate and lower growth assumptions.
The central one suggests the Scottish economy will have contracted by 5% during 2009 - substantially worse than the 2.9% contraction forecast with the report in June.
It goes on to see growth in 2010 of only 0.1%, followed by a sluggish 1.1% and 1.6% in subsequent years.
'Three scenarios'
The lower growth assumption would see the Scottish economy shrink in 2010 and 2011, only returning to 0.5% growth in 2012.
“We are now forecasting that the Scottish economy will perform less strongly than the UK in 2009 on all three scenarios,” the report states.
“Indications of recovery are weaker here than in many other UK regions. We therefore expect Scotland to emerge from recession in the fourth quarter (of 2009), with likely growth around 0.2%, but less strongly than the rest of the UK.
“There remains a possibility that the recession will not end in Scotland in the fourth quarter even though it does so in the UK economy as a whole.
“It would be a mistake to conclude that the economy's troubles are over once growth resumes and the recession ends.”
(Source: BBC News)
-