Bad but progress: The economy is slowly recovering in line with expectations

Bad but progress: The economy is slowly recovering in line with expectations

Economic data in early 2024 showed that the economy may recover as expected, following contractions in growth in the latter part of 2023. This is according to a recent economic assessment by the Fraser of Allander Institute at the University of Strathclyde.

The Institute's Quarterly Economic Commentary, which includes an assessment of all the latest key data on the UK and Scottish economies, is published today.

In an economic commentary from Deloitte, University of Strathclyde researchers set out the latest forecasts for the Scottish economy. Economists forecast growth of 0.6% in 2024, 1.1% in 2025 and 1.2% in 2026. These projections are unchanged from the previous estimate.

Bright spots can be seen in UK headline inflation data, with consumer price inflation easing to 3.4% in February, adding to hope that interest rate cuts could come in January 2024. GDP data for the UK shows growth after a poor end to 2024.

In Scotland, consumer sentiment rose by 4.8 points in the last quarter and by 23 points over the year, indicating a significant improvement in sentiment across Scotland. However, most indicators are in a negative landscape (meaning more people are negative than positive about their circumstances) reflecting the challenging economic and financial pressures families face.

Fraser of Allander's latest assessment includes real-time earnings monitoring, the impacts of changes to the National Minimum Wage to be introduced in April 2024 and analysis of key public policy priorities for citizens in Scotland. These include health care and the NHS, inequality & poverty, housing and the cost of living.

Institute director Professor Mairi Spovage said: „The mix of economic news we're currently seeing in both Scotland and the UK can give reasons for pessimism or optimism.

“On the one hand, the economy returning to growth in January and inflation falling faster than expected supports our view of a return to overall growth in 2024. On the other hand, this growth is fragile and could be swayed by events, especially given the geopolitical uncertainty this year.

„Our report chimes with other data released today by the Scottish Chambers of Commerce, which shows businesses are confident and resilient in the face of challenges.”

Douglas Farish, Head of Tax for Scotland at Deloitte, said, „While it was encouraging that Scotland avoided a tech recession late last year, this quarter's economic commentary still paints a bleak view of the country's current economic state, with overall growth slowing in 2023.”

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“The cost of living crisis continues to affect housing finance and our latest State of the State 60 per cent of Scottish people believe the crisis will get worse, although this is down from 75 per cent last year.

The Institute's quarterly commentary also includes an analysis of the implications of the UK budget at 6Th March for Scotland includes the second National Insurance cut, the impact on the overall tax burden and the impact of the UK Government's spending decisions on the Scottish Government's budget.

The agency's deputy director, Joao Sosa, said: „The lack of significant changes in resource and capital sector spending further confirms the Scottish Government's difficult financial environment, and this will be evident again when Deputy First Minister Shona Robison presents the Media-Time Financial Strategy (MTFS) on 30 May.

“There is a £2.4 billion shortfall in 2025-26 funding for the 2023 MTFS, and a £1.5 billion shortfall in 2024-25 filled by project delays, so more difficult results are likely to come.

„This is not to say that the Scottish Government will not receive any additional spending implications from the UK Budget on the 6th.Th March. £295m of Barnet's impact for 2024-25 comes from Chancellor's announcements.

You can read the full description here Here.

Photo by Mairi Spovage, director of the Fraser of Allander Institute

Mairie Fraser is the director of the Allander Institute. Previously, he was Deputy Chief Executive of the Scottish Fiscal Commission and Head of National Accounts at the Scottish Government, and has over a decade of experience working in various fields of statistics and analytics.

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Ben is an Economist at the Fraser of Allander Institute, working in several project areas. He holds an MA in Economics from the University of Edinburgh and a BA in Economics from the University of Strathclyde.

His main areas of focus are economic policy, social care and criminal justice in Scotland. Ben co-edits the Quarterly Economic Commentary and has experience in business research design and dissemination.

Emma Fraser is Deputy Director and Senior Knowledge Exchange Fellow at the Allander Institute

Jono is Associate Director and Senior Knowledge Exchange Fellow at the Allander Institute Fraser. Previously, he was Senior Financial Analyst at the Office for Budget Responsibility, where he led analysis of the long-term sustainability of the UK's public finances and the impact of economic developments and fiscal policy on the UK's medium-term outlook.

Ciara Fraser is an associate economist at the Allander Institute.

Brady is a knowledge transfer assistant at Fraser Allander Company. He recently completed an MSc in Applied Economics from the University of Strathclyde and a First Class Honors degree in Economics and Politics from the University of Glasgow.

Kate is a Knowledge Transfer Assistant at FAI working across several project areas. He is currently studying for an MSc in Economics at the University of Edinburgh and holds a BA in Economics from the University of Strathclyde. Kate is also the Outreach Coordinator for the Women in the Economy initiative, which aims to promote equal opportunities and improve representation in the sector.

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