SCOTLAND'S economic growth forecast for 2023 has been revised down due to the impacts of cost increases on consumers and businesses, and the likelihood that these will persist for longer than previously thought, according to the Fraser of Allander Institute (FAI) at the University of Strathclyde.
In the Deloitte-sponsored Economic Commentary, the FAI forecasts growth of 3.8% in 2022 and 0.5% in 2023, a significantly poorer outlook than previously estimated, with more than half of consumers spending less on non-essentials, and another third spending less on food and other essentials, as property rental and ownership costs also increase significantly.
FAI director Professor Mairi Spowage said: “The data shows that the Scottish economy’s recovery from the pandemic is starting to falter, that inflation will be high and persistent, potentially limiting the economic recovery we’d hoped to see, as consumers cut spending and businesses limit production due to input costs.”
Angela Mitchell, senior partner for Deloitte in Scotland, said: “While Scotland’s economic recovery was well under way in the first quarter of 2022, challenges for businesses are likely to remain throughout this year because of the cost of living pressures being driven by rising inflation and interest rates.
"Weaker demand, higher costs and uncertainty inhibit investment and growth for businesses who will have to prioritise technology, innovation, digital transformation and the experiences they developed during the pandemic, to help them overcome the ups and downs of the economic cycle.”
The commentary also analyses the outlook for Scottish public finances until 2027 and David Eiser, deputy director of the institute, said: “The government deserves some credit for setting out its plans despite significant uncertainty in its budget, and the stark reality of its spending decisions.
“The Government’s overall budget will barely increase at all because of the UK Government’s fiscal plans and the implications of these for the block grant.
“Having made funding commitments on social security and health, the implication is for funding cuts to local government, policing and justice, higher education and enterprise support.”
