Scottish economy to contract in 2023

The Scottish economy is forecast to contract by one per cent over the year, according to the respected Fraser of Allander Institute (FAI) think tank.

Researchers believe Scotland will be in recession for the first three quarters of the year before returning to growth in Q4.

Annual growth of 0.6 per cent is predicted for 2024.

FAI director Mairi Spowage has said high inflation is continuing to have an impact, which means many households will struggle.

She said: “We agree with many other forecasters that there is likely to be growth in the economy towards the end of the year as inflation comes down.

“However, we need to remember that this only means that prices stop rising quite as quickly: it does not mean that prices will start to fall. Things are likely to remain difficult for households throughout 2023.”

The forecast indicates spring will be a “challenging period” for businesses and consumers as government support for energy bills is wound down.

Reflecting on the Scottish Government’s budget – the bill for which underwent stage two on Tuesday – the FAI also warned the prioritisation of social security and health mean others areas face cuts.

The think tank has also urged the government to improve transparency about figures in the budget, noting in particular the lack of clarity around spending for the new National Care Service and public service reforms.