Scottish economic bulletin: April 2024

Economic Outlook

Economic conditions are forecast to improve with stronger growth and lower inflation.

• The outlook for economic growth in 2024 remains relatively subdued however is expected to strengthen while inflationary pressures are forecast to moderate further.
• In December, the Scottish Fiscal Commission forecast Scotland’s economic growth to strengthen from 0.1% in 2023 to 0.7% in 2024, rising to 1.1% in 2025. Most recently in March, the Fraser of Allander Institute forecast a similar pattern of strengthening growth of 0.6% in 2024, rising to 1.1% in 2025. At a UK level, in March the Office for Budget Responsibility forecast UK growth to strengthen to 0.8% in 2024 rising to 1.9% in 2025.^{[18],[19],[20]}
• The HMT March average of new independent UK forecasts further illustrates the expectation of stronger growth and falling inflation with UK GDP growth forecast on average to rise to 0.3% in 2024 and 1.2% in 2025, while inflation is forecast to fall on average to 2.1% in Q4 2024 and remain at 2.1% at the end of 2025.^[21]

  

• In March, the Bank of England projected inflation to fall temporarily below the 2% target in the second quarter of 2024 before rising slightly back above target during the second half of the year.^[22] This reflects a combination of factors including base effects which continue to work through the annual data while the 12.3% decrease in the Energy Price Cap (-32.4% annually) will also impact.
• The Bank of England maintained the Bank Rate at 5.25% in March, however the projected fall in inflation this year has raised expectations that the Bank Rate will be reduced during the year. This, alongside the recent improvements in growth, business activity and consumer sentiment and resilience in the labour market underpin the stronger growth outlook for the year ahead. Downside risks to the economic outlook remain, notably from developments in the Middle East including disruption to shipping through the Red Sea.