The vaccine rollout and unlocking of parts of the Scottish economy are hugely positive but the delay in a further easing of Covid-19 restrictions will cause “issues” for certain sectors.
That is the message in the latest Economic Commentary from Strathclyde University’s Fraser of Allander (FoA) Institute.
The pace of reopening the Scottish economy, thanks to a swift vaccine rollout, has prompted the think-tank to raise its forecast for economic growth north of the border this year to 5.9%, from 3.6% previously.
FoA’s Deloitte-sponsored report adds: “We are now expecting that the economy will return the pre-pandemic levels in the summer of 2022, three months earlier than we were forecasting in March.”
It is undoubtedly the case that growth is returning to our economy.”
Mairi Spowage, Fraser of Allander Institute
The report says that while recent pauses in the roadmap to ease restrictions have been challenging, particularly for those sectors and regions hardest hit by the pandemic, the Scottish economy has seen “significant opening up” since late April.
This has been facilitated by vaccine deployment, which has already seen 82% of the adult population receive their first dose, FoA adds.
Consumers ‘ready to spend’
Institute director Mairi Spowage said: “It is undoubtedly the case that growth is returning to our economy.
“In the aggregate, consumers appear to be ready to spend the record savings that have been accumulated throughout the course of the pandemic.
“With a large proportion of the population vaccinated, people have shown that in general they are keen to spend their money in social settings to feel a bit more normality.”
Ms Spowage added: “Despite our optimism, it is important to remember that forecasts are still very uncertain.
“The lengthening of the roadmap we have seen in recent days underlines the unpredictable nature of this virus, and the road ahead is likely to continue to be a bumpy one.”
The lengthening of the roadmap we have seen in recent days underlines the unpredictable nature of this virus, and the road ahead is likely to continue to be a bumpy one.”
FoA is warning there are also risks to recovery which may provide headwinds to growth.
A “dislocation” in global trade has been significant due to the pandemic and Brexit, the report says, adding: “This has led to major issues for manufacturers and others trying to rebuild these supply chains.
“While the economy faces significant changes as it moves through to the recovery phase, the way people work has also changed, particularly for those who have been able to work from home during the pandemic.
Uncertainty over office return
“As some businesses begin to consider a part-time return to the office, alongside homeworking practices, it remains to be seen how persistent these changes will be.”
Angela Mitchell, senior partner in Deloitte’s Glasgow office, said: “The optimistic forecast set out in the latest commentary will be welcomed by many, despite current challenges, and lines up with Deloitte’s expectation that the UK economy will be one of the fastest-growing in Europe in 2021, having suffered one of the largest contractions last year.”
The full commentary can be found on the FoA website here.