Scottish economic bulletin: November 2024

Economic Outlook

The economic outlook remains stable from recent months and is indicative of moderate improvement in economic conditions.

• 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 in 2024 and 2025. However, the international context remains challenging and significant downside risks remain.
• Globally, both the IMF and OECD forecasts from October suggest economic growth will ease slightly in 2024 and stabilise through 2025. The IMF forecast global growth of 3.2% in both 2024 and 2025 (down from 3.3% in 2023), with the pace of growth in the US forecast to slow while growth in the Euro Area strengthens. The OECD also forecasts growth of 3.2% in 2024 and 2025 with lower inflation, improving real incomes and falling interest rates supporting growth.^[25],[26]
• At a UK level, the latest OBR forecasts suggest that, after the latest fiscal policy changes are accounted for, UK GDP will grow by 1.1% in 2024, increasing to 2% in 2025 and 1.8% in 2026. Meanwhile, inflation is forecast to rise slightly in the short term and average 2.5% in 2024 before peaking at 2.6% in 2025 and falling to 2.3% in 2026.
• The Bank of England forecast similar trajectories in its November 2024 MPR with both GDP growth and inflation projected to be higher than in their previous forecast. GDP is forecast to grow 1.5% in 2025 before falling to 1.25% in 2026. Compared to the August 2024 MPR, this represents faster growth in 2025, while the growth forecast for 2026 remains broadly unchanged. Inflation is forecast to peak at 2.8% in Q3 2025, before gradually falling back below target to 1.9% in the second half of 2027. This reflects a slightly higher degree of inflation persistence than in the August MPR, in which inflation was forecast to fall below target in the second half of 2026.
• The latest HMT average of new independent UK forecasts in October suggests growth will strengthen from 0.1% in 2023 to 1% in 2024 and 1.2% in 2025. Alongside this, inflation is forecast to rise to 2.5% later in 2024 before easing back to 2.2% in 2025.^[27]

• In Scotland, the most recent forecast from the Fraser of Allander Institute in October projected Scotland’s GDP growth to strengthen from 0.1% in 2023 to 0.9% in 2024 (up from 0.7% in June’s forecast) and 1.1% in 2025. Forecasts produced by the SFC will be released in December as part of the Scottish Budget process.^[28]