Scotland’s economic outlook has “significantly improved” since the start of the year, experts indicate.
In a new report, the Scottish Fiscal Commission (SFC), the country’s independent economic and fiscal forecaster, revised its estimates to suggest the economy will now grow more quickly than thought.
The body explained that with coronavirus restrictions being lifted at a faster pace than anticipated, the economy has recovered more rapidly.
GDP (Gross domestic product) is now expected to reach its pre-Covid level in 2022 Q2 – two years earlier than the SFC had forecast in January 2021.
In light of the speed of the recovery, the SFC said it had also reduced its estimate of Covid-related scarring to trend productivity to 0.8 per cent – down on the 2.2 per cent which was estimated in January this year.
In their report, the SFC stated: “The success of the Covid-19 vaccination programme has weakened the links between case numbers, hospitalisations and deaths and has led to a shift in the public health approach of both the UK and Scottish Governments.
“Formal restrictions have eased significantly and we now appear to be moving in to the recovery phase from the pandemic.
“In our forecast, we assume there are no future waves of rapidly rising Covid-19 deaths and hospitalisations, though cases may rise again significantly for periods.
“With deaths and hospitalisations remaining low, public health restrictions remain minimal. Overall, this leads to a more positive outlook for the economy compared to our January 2021 forecasts.”
The body noted that economic activity will remain lower than pre-pandemic levels until 2022 as householders and businesses adjust to a “new normal”.
“The pathway out of the Covid-19 pandemic is unlikely to be completely smooth,” they wrote.
“We expect it will take time for households and businesses to adjust to a new normal, so economic activity will remain lower than pre-pandemic until 2022.
“It is, however, not yet clear how individuals and businesses will respond to the easing of restrictions while Covid-19 remains prevalent.
“There are also ongoing international supply pressures which combined with domestic recruitment challenges present risks to our forecasts.
“The downside risk remains of new public health restrictions being imposed if the vaccines become less effective at preventing hospitalisations and deaths through vaccine escaping variants of the virus emerging or a general reduction in the effectiveness of vaccines that is not countered by a booster programme.”
Scotland’s finance secretary Kate Forbes said the forecasts are a “further sign” that Scotland’s economy is emerging from the pandemic in “good shape”.
“I warmly welcome the SFC’s updated forecasts which suggest Scotland’s economy is recovering from Covid-19 much faster than anticipated,” she said.
“The predicted return of economic activity to pre-pandemic levels in the first half of 2022, almost two years of ahead of the SFC’s previous forecast, is a tribute to the innovation and adaptability displayed by businesses during the pandemic.”
Forbes added: “The pandemic is not over. Challenges remain and sectors such as retail, tourism and hospitality still face obstacles on the road to recovery.
“But the SFC’s forecasts are a further sign that Scotland’s economy is emerging from the global pandemic in good shape as we work with business and trades unions to build a greener, fairer and more prosperous economy with wellbeing at its core.”
Scottish Conservative finance and economy spokesperson Liz Smith said: “This report confirms the huge success of UK Government job and business support schemes.
“Our economy is on course to rebound swiftly but only if we stick together and both of Scotland’s governments fully focus on our recovery.
“While this report is encouraging, the economic outlook remains precarious. The reintroduction of Covid restrictions could hinder growth and knock business confidence.
“Our economic recovery could be thrown off course by the looming threat from the SNP-Green nationalist government and their anti-jobs, anti-business agenda.
“What businesses really want now is certainty and stability, not a damaging coalition of chaos.”
STV News is now on WhatsApp
Get all the latest news from around the countryFollow STV News
Follow STV News on WhatsApp
Scan the QR code on your mobile device for all the latest news from around the country