Scottish economic bulletin: January 2025

Economic Outlook

Growth is forecast to strengthen in 2025 while inflation is expected to remain slightly higher than previously forecast.

• The economic outlook for 2025 is for stronger GDP growth and more stable inflation than in 2024, however there remain downside risks.
• The latest Scottish Fiscal Commission forecast for the Scottish economy expects 1% growth in 2024 (up from 0.2% in 2023) rising to 1.5% growth in 2025 and 1.6% in 2026.^[20] This pattern of stronger growth is expected more broadly at a UK level with the Office for Budget Responsibility forecasting UK GDP growth of 1.1% in 2024, rising to 2% in 2025 and 1.8% in 2026.^[21]
• Most recently, the latest HMT average of new independent UK forecasts also indicates growth will strengthen from 0.8% in 2024 to 1.3% in 2025.^[22]

• Alongside the stronger growth outlook, the inflation outlook for 2025 remains more stable than it has been in recent years, albeit that inflation is expected to remain slightly higher than forecasts from earlier in 2024.
• The latest HMT average of new independent UK forecasts indicate inflation to remain unchanged at 2.5% in Q4 2024 and Q4 2025, with the latter gradually rising from an average of 2.1% forecast in June 2024. Furthermore, the Bank of England’s Monetary Policy Committee reported in December that while most indicators of UK near-term activity had weakened, inflation, wage growth and some indicators of inflation expectations had risen and added to the risk of inflation persistence.^[23]
• The stronger outlook for the Scottish and UK economy is set against moderately strengthening global conditions. At a global level, the OECD forecast global economic growth to strengthen from 3.2% in 2024 to 3.3% in 2025 and 2026, supported by lower inflation, employment growth and looser monetary policy as central banks continue to gradually reduce interest rates.
• However, the OECD note there remain significant downside risks to the global growth and inflation outlook from the ongoing conflicts in the Middle East and increased trade policy uncertainty.^[24]