A new report from the Fraser of Allander Institute warns the country now faces “its deepest recession in living memory”.
It added recovery could take four years in the worst-case scenario if there was another spike of coronavirus cases and stringent lockdown measures had to be reimposed.
However, in the most optimistic scenario, assuming the easing of restrictions goes “smoothly”, it said it was possible the Scottish economy could get back to pre-crisis levels within 18 months.
The Fraser of Allander Institute said: “There is an optimistic view that if firms survive the immediate next few weeks and the restart of key sectors goes smoothly, the recovery may build momentum relatively quickly … economic activity could pick-up sharply as demand returns.”
Figures last week showed GDP in Scotland plummeted 18.9% in April. The number of Scots receiving Universal Credit rose more than 440,000 in May – more than double the total of 185,000 recorded in the same month last year.
A second wave of a virus-induced lockdown could prove catastrophic and slow long-term economic growth for years to come, the report warns.
“Should there be a second wave and reintroduction of more stringent restrictions, the hit to the economy will be all the greater,” it states. “We estimate that this could mean the economy does not get back to pre-crisis levels until mid-2024.”
With more than 750,000 people in Scotland either furloughed or being supported through the UK Government’s self-employment scheme, the think tank fears a possible “raft of redundancies and business closures” when this help starts to be scaled back.
“[The Scottish Government] needs to develop an effective plan for the safe return of schools to let parents return to work,” the report says. “[Governments need to] get the right balance between the easing of their support measures and the lifting of restrictions.”
The crisis and lockdown has left many businesses and individuals in a weak financial position, said Deloitte’s senior partner for Scotland Steve Williams.
“Businesses and some individuals are likely to emerge with a combination of higher debt and weaker financial reserves,” he said. “What’s crucial … is that we give our economy the best chance of recovering quickly so that inequalities are not simply left to grow.”
A Scottish Government spokeswoman said: “Our published analysis suggests that Scotland’s economy faces a gradual recovery and, as we now carefully reopen, following the route map out of lockdown, we will continue to work with employers so that they can safely get back to work and help the economy on its path to recovery.
“The report of the advisory group on economic recovery was published on Monday.
“The recommendations will now be considered in detail by the Scottish Government and partners.”