Monthly economic brief: August 2020

GDP Growth Outlook

The economic outlook for 2020 has stabilised in recent months, albeit at a low level, but with high levels of uncertainty for the medium term as a result of the pandemic and the necessary restrictions on economic activity to minimise the spread of the virus.

• The scale and duration of the economic impacts from the pandemic remain highly uncertain with substantial ongoing risks associated with further increases in COVID-19 infection rates and the potential reintroduction of restrictions, the pace at which economic activity and output will recover to pre-pandemic levels, and the feed through to the labour market as support schemes are unwound.
• At a global level, the IMF World Economic Outlook Update^[25] projects global GDP to fall by 4.9% in 2020 with output from Advanced Economies falling 8% and Emerging Markets and Developing Economies falling 3%.
• At a domestic level, as the UK and Scottish economy have continued to reopen, business activity has stabilised and started to recover growth as firms have reopened and restarted operations. However, underlying demand remains subdued with new orders/business, domestic and international starting to recover from low levels and businesses continuing to reduce staffing levels to contain costs and adapt to lower levels of demand.
• In Scotland, scenario analysis published in June, suggests GDP could fall by 14% in 2020 and unemployment could rise above 10% and not return to pre-crisis levels until 2023-24.^[26]
• More recent projections from the Bank of England estimates UK GDP could fall by 9.5% this year^[27] while the latest average of new independent forecasts published by HM Treasury's^[28] suggests UK GDP could contract by -9.1% in 2020.

Figure Description

This chart displays the range of independent forecasts for UK GDP in 2020 by month. At the start of 2020, independent forecasters expected UK GDP to increase by 1.1 percent on average, from March onwards forecasters became more pessimistic about the UK economic outlook. The latest average of new independent forecasts in July 2020 suggests UK GDP could contract by -9.1% in 2020.