Scotland’s economy is likely to contract in the second half of 2022, according to researchers at the Fraser of Allander Institute.
The Institute’s quarterly Economic Commentary, which includes an assessment of all the key latest data on the UK and Scottish economies, is published today.
In the Deloitte-sponsored Economic Commentary, the Strathclyde researchers have set out their new forecasts for the Scottish Economy.
The economists are forecasting growth of 3.6% in 2022, followed by a contraction of -0.6% in 2023, before returning to growth in 2024 of 0.8%. This is a significant revision down from the Institute’s previous set of forecasts in June.
The forecasts assume that the last two quarters of the year, and the first quarter of 2023, will show contractions in the economy due to wider economic challenges. This means that Scotland is likely to be entering into a recession (defined as two-quarters of negative growth in the economy).
With inflation at a 40-year high, this quarter’s Commentary also includes an extensive analysis of the likely impact of price rises on different types of households in the economy.
Professor Mairi Spowage, director of the institute, said: “The data we analyse in the Commentary today points to weakening demand in the economy as inflationary pressures pervade every aspect of our lives.
“Consumer confidence is starting to weaken with attitudes on the outlook looking pessimistic. This has led us to reduce our forecasts for 2023 and 2024. Our assumption is that there will likely be contractions in the economy during the second half of 2022 and into 2023 given wider economic conditions.
“In practice, this means Scotland is likely to enter a recession.”