State of the economy: October 2018
Report produced tri-annually by the Chief Economic Adviser to provide a picture of the Scottish economy in an international context.
Scotland’s Economic Outlook
Independent forecasts of the Scottish economy suggest output growth in Scotland could strengthen over the next couple of years, however will remain below trend.
The table below sets out a selection of independent forecasts and projections. The Scottish Fiscal Commission (SFC) forecast (from May 2018) is currently notably more cautious than other independent forecasters. However, since May, data revisions have improved Scotland’s recent economic performance and as a consequence, Scottish GDP grew 1.3% in 2017, higher than the SFC’s forecast of 0.7%. Alongside this, latest GDP data shows Scotland’s economy has grown 0.8% in the first half of 2018, higher than the SFC’s forecast of 0.7% for the year as a whole.
The SFC are due to update their forecasts for the Scottish budget on 12 December and will consider the latest outturn data as part of that process.
Independent Scottish GDP Growth Forecasts (%)
| 2017 (outturn) | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|---|
| Scottish Fiscal Commission | 1.3 | 0.7 | 0.8 | 0.9 | 0.9 | 0.9 | 0.9 |
| Fraser of Allander Institute | 1.3 | 1.4 | 1.4 | - | - | - | |
| EY ITEM Club | 1.3 | 1.6 | 1.5 | 1.7 | - | - | |
| PWC | 1.0 | 1.2 | - | - | - | - |
With less than six months to go before the UK leaves the EU, Brexit remains the key downside risk to Scotland’s economic outlook.
In this edition of the State of the Economy, we have set out the potential volatility we might see in the economic data over the course of the year as businesses prepare for any potential disruptions to their business operations. In their latest forecast report, the Fraser of Allander Institute highlighted the particular short term risk to the outlook if a ‘no deal’ scenario occurs on top of the continued pressure that Brexit uncertainty is expected to have on investment activity.
Potential areas for growth continue to be in the production sector as confidence and activity in the North Sea supply chain strengthens, while the relatively low value of Sterling should continue supporting export activity and tourism to Scotland. Alongside this, improvements in earnings growth should better support household spending, however inflationary pressures alongside weak consumer sentiment may continue to present challenges for households and household facing sectors.
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