Economy expected to ‘return to pre-pandemic levels in 2022’

Experts believe Scotland's economy will bounce back earlier than expected despite restrictions continuing.

Economy expected to ‘return to pre-pandemic levels in 2022’ iStock

Scotland’s economy is expected to return to its pre-coronavirus level in the summer of 2022, three months earlier than previously forecast.

Experts at the Fraser of Allander Institute at Strathclyde University said their forecasts for GDP growth had been revised upwards against the “positive backdrop” of the vaccinations allowing restrictions to be eased.

Back in March, economists there had forecast GDP would grow by 3.6% this year, but this has now been upped so that growth of 5.9% is expected over the course of 2021.

It also said that based on the latest figures “the Scottish economy is slightly ahead of the UK’s overall in terms of its recovery”.

The commentary, which is sponsored by Deloitte, stressed however that despite current optimism “forecasts at the moment are still very uncertain”.

But the report said that the “recovery in the Scottish economy is under way, despite recent delays in the easing of restrictions”.

The Scottish Government had hoped to have been able to move all of the country to level zero – the lowest level of coronavirus restrictions – on June 28, but First Minister Nicola Sturgeon confirmed this week that this will not likely happen now till July 19.

But with restrictions having been relaxed somewhat already, and many Scots fully vaccinated, Fraser of Allander director Mairi Spowage said many were now “keen to spend their money in social settings”.

She spoke out as the latest commentary said: “We have revised up our forecasts for the Scottish economy. We expect the economy will grow 5.9% in 2021 and 3.5% in 2022.

“We are now expecting that the economy will return the pre-pandemic levels in the summer of 2022, three months earlier than we were forecasting in March.”

The report continued: “It’s important that we don’t forget how far we have come: the Scottish economy has seen significant opening up since late April. This is of course down to the incredible progress of the vaccine programme.

“Incredibly, we are now in the situation where 79% of adults have had at least the first dose of a vaccine against Covid-19: a feat which seemed impossible just six to seven months ago.”

And they said with progress in delivering vaccinations “well on track” ministers were now “signalling a change in the months to come in the way the manage any future outbreaks to reduce economy wide or local restrictions”.

Ms Spowage, said: “We have today revised up our expectations for growth in 2021 and 2022. Despite the pausing in the easing of restrictions we have seen over the last week or so, it is undoubtedly the case that growth is returning to our economy.

“In the aggregate, consumers appear to be ready to spend the record savings that have been accumulated throughout the course of the pandemic. With a large proportion of the population vaccinated, people have shown that in general they are keen to spend their money in social settings to feel a bit more normality.”

But she added: “Despite our optimism, it is important to remember that forecasts are still very uncertain.

“The lengthening of the roadmap we have seen in recent days underlines the unpredictable nature of this virus, and the road ahead is likely to continue to be a bumpy one.”

Angela Mitchell, senior partner for Deloitte’s Glasgow office, said: “The optimistic forecast set out in the latest commentary will be welcomed by many, despite current challenges, and lines up with Deloitte’s expectation that the UK economy will be one of the fastest growing in Europe in 2021, having suffered one of the largest contractions last year.”

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