Scotland’s growth forecast for 2022 has been revised down due to the impacts of cost increases on consumers and businesses – issues that are being exacerbated by uncertainties caused by the war in Ukraine.
This is according to the latest quarterly Economic Commentary from the Fraser of Allander Institute at the University of Strathclyde.
In the Deloitte-sponsored Economic Commentary, the Institute forecasts growth of 3.5% in 2022 and 1.5% in 2023. The outlook has significantly worsened for 2022 since the last set of forecasts in December 2021.
The Commentary examines all of the latest data on the global, UK and Scottish economies, including a detailed analysis of the latest GDP, employment and inflation figures.
Two years on from the first lockdown the latest data shows that the Scottish economy has just recovered to pre-pandemic levels. However, this overall picture hides a disparate sectoral story, with hospitality and leisure businesses still operating significantly below pre-COVID-19 levels of output.
The analysis in this quarter’s Commentary shows that consumers are starting to feel the pinch, with many consumers noticing increases in their food shopping, their energy bills, and the cost of fuel. This is before the expected increases in April as the energy price cap moves up still further.
This follows the Chancellor’s Spring Statement in March which was presented in part as a package of measures to assist households through this difficult time.
Director of the Institute, Professor Mairi Spowage, said: “The measures introduced by the Chancellor’s Spring Statement are not likely to be sufficiently targeted to help those on the lowest incomes. Consumers and businesses are going to feel the squeeze in the coming months, if they haven’t already, with soaring energy and food bills.
“This has the potential to limit the economic recovery we hope to see during 2022, as consumers cut back on discretionary spending, and even perhaps businesses limit production due to input costs.
“These circumstances have led us to revise down our expectations for growth during 2022. Of course – and we feel like we have said this a lot over the last 2 years – economic forecasting is a tricky business at the best of times, but forecasts are highly uncertain right now.”