Think-tank’s mixed message on shape of Scots economy

Report: Fraser of Allander Institute warns of recession but predicts growth

An influential think-tank says Scotland’s economy seems stuck in a cycle of weak growth, declining confidence and poor investment.

And Strathclyde University’s Fraser of Allander Institute warns the country may already be in a recession.

But it also hails recent business surveys showing a recent pick-up in activity as a sign the nation’s economy has probably avoided a slide into reverse and is on track for growth – in gross value added (GVA) terms – during 2017.

Fraser of Allander’s forecast of GVA growth for this year, and increases of 1.4% and 1.6% in 2018 and 2019 respectively, are in line with its March outlook.

Scotland’s economy continues to lag behind that of the UK as whole, the thinktank says.

Next week’s official gross domestic product figures for the first quarter of 2017 will confirm whether or not the Scottish economy has technically re-entered recession after two consecutive quarters of negative growth.

According to Fraser of Allander, it is “likely to be a close-run thing”.

In its latest Economic Commentary, the institute says Scotland’s woes can no longer be explained just by the downturn in the North Sea or Brexit.

A two-year slowdown seems to have spread across a wider set of industrial sectors than was previously the case, it says, adding activity levels in the manufacturing and construction sectors fell and services did not grow during the final three months of 2016. Launching its report into the financial health of the nation, the think-tank adds: “Scotland’s economy seems to be stuck in a cycle of weak growth, declining confidence and poor investment and net export figures.”

It also warns the outlook for household finances looks “grim” due to continuing weak productivity growth and rising inflation.

Families are supporting their spending by running down savings and expanding credit, the think-tank says, adding: “This cannot

“Should the Brexit talks go badly, Scotland’s prospects could take a sharp turn for the worse”

continue longer.”

Fraser of Allander director Graeme Roy said: “In the current climate sentiment can change quickly.

“Should the upcoming Brexit negotiations go badly, or the UK economy slows down more quickly than anticipated, then Scotland’s economic prospects could take a sharp turn for the worse.” for much

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