SCOTLAND’S economic output will still return to pre-pandemic levels in spring next year but the Omicron coronavirus variant “casts a shadow over the speed of recovery in 2022 as restrictions are increased”, a leading think-tank forecasts today.
The University of Strathclyde’s Fraser of Allander Institute is forecasting in its quarterly commentary that the Scottish economy will return to pre-pandemic levels in May next year, one month later than it had projected back in September. This revised prediction reflects growth in the autumn underperforming the previous forecast.
Fraser of Allander observes “the impact that the latest restrictions may have on the economy, particularly on the retail and hospitality sectors, will take some time to emerge”.
In today’s commentary, sponsored by accountancy firm Deloitte, Fraser of Allander predicts growth of 6.4 per cent this year and 4.7% in 2022.
Fraser of Allander director Mairi Spowage said: “The economy is in a better place than feared a year ago, underpinned by the delivery of the vaccination programme and the advancements made in understanding and treating the virus.
“As we moved through the first half of 2021, the prospects for growth in the economy continually improved. Despite growth faltering in the autumn due to rising prices and supply-chain constraints, expectations are much better for the outlook in 2022 and beyond, compared to what was feared earlier in the pandemic.”
Fraser of Allander flagged “initial signs that Scotland may be recovering more slowly than the UK as a whole, with both output and earnings data lagging the UK”.
Ms Spowage said: “Despite the threat of the new Omicron variant, we have chosen to keep our forecasts broadly similar to those we produced in the autumn. This sees growth getting back to pre-pandemic levels in Scotland in May 2022, a little later than previously forecast, due to sluggish growth in the autumn.
“But, of course, these forecasts are very uncertain right now. The announcements made earlier this week, however necessary they may be for public health reasons, are likely to put a constraint on some businesses’ ability to make the most of the important Christmas period.”