Rising inflation weakens Scottish economic growth outlook in 2023
According to the Fraser of Allander Institute (FAI) at the University of Strathclyde, SCOTLAND’s economic growth forecast for 2023 has been revised down due to the impacts of cost increases on consumers and businesses, and the likelihood that they will persist longer than previously thought. .
In the Deloitte-sponsored economic commentary, the FAI predicts growth of 3.8% in 2022 and 0.5% in 2023, significantly worse prospects than previously estimated, with more than half of consumers spending less on non-essentials, and another third spending less on food and other essentials, as rental and ownership costs also increase significantly.
FAI Director Professor Mairi Spowage said: “The data shows that the recovery of the Scottish economy from the pandemic is starting to falter, that inflation will be high and persistent, potentially limiting the economic recovery we had hoped for. see, as consumers cut spending and businesses. limit production due to input costs.
Angela Mitchell, senior partner at Deloitte in Scotland, said: “While Scotland’s economic recovery was well underway in the first quarter of 2022, challenges for businesses are expected to persist throughout this year due to cost pressures. of life driven by rising inflation and interest rates.
“Lower demand, higher costs and uncertainty are holding back investment and growth for companies that will need to prioritize technology, innovation, digital transformation and the experiences they have built over the years. the pandemic, to help them weather the vagaries of the economic cycle.”
The commentary also analyzes the outlook for Scottish public finances to 2027 and David Eiser, the institute’s deputy director, said: ‘The government deserves some credit for presenting its plans despite significant uncertainty in its budget and the tough reality of its spending decisions. .
“The overall government budget will hardly increase at all due to the UK government’s budget plans and their implications for the block grant.
“Having made funding commitments for social security and health, this means cuts to funding for local government, police and justice, higher education and business support.”