Scottish economic bulletin: December 2024

Economic Outlook

Growth is forecast to improve moderately over the coming year.

• Following the improvement in economic conditions in the first half of 2024, the economic outlook has remained largely stable and continues to indicate overall stronger growth this year and into 2025 and 2026.
• The Scottish economy grew 0.2% in 2023 and the Scottish Fiscal Commission forecast improving growth of 1% in 2024, rising to 1.5% in 2025 and 1.6% in 2026. This pattern of improving growth is broadly consistent with the Fraser of Allander Institute October forecasts of 0.9% growth in 2024, rising to 1.1% in 2025 and 1.2% in 2026.^[27]

• At a UK level, the Office for Budget Responsibility forecast GDP to grow by 1.1% in 2024, rising to 2% in 2025 and 1.8% in 2026. The latest HMT average of new independent UK forecasts also indicates growth will strengthen, albeit to a lesser extent, from 0.9% in 2024 to 1.3% in 2025. ^[28],[29]
• Alongside the strengthening growth outlook, the inflation outlook is more stable than it has been in recent years. The Bank of England forecast inflation to rise going into the new year and peak at 2.8% in Q3 2025 before falling to 1.9% in the second half of 2027. The latest HMT average of new independent UK forecasts indicate inflation to ease from 2.4% in 2024 to 2.3% in 2025.^[30]

• The stronger outlook for Scotland and the UK is set against a broader global context for growth and inflation. Both the IMF and OECD forecast that global growth will ease slightly in 2024 and stabilise through 2025. The IMF forecast global growth of 3.2% in both 2024 and 2025, with US growth expected to slow as growth in the Euro Area improves. The OECD also forecasts growth of 3.2% in 2024 and 2025 with lower inflation, improving real incomes and falling interest rates supporting growth. Developments in these global economic conditions continue to highlight the uncertainty in the economic outlook.^[31],[32]