Scottish economic growth this year and next is likely to be weaker than expected, while a possible Brexit from the EU would damage prospects further down the line, a think-tank warned yesterday.
Strathclyde University’s Fraser of Allander Institute said a potential Brexit was a “real threat” to Scotland’s future growth.
Trade and investment would suffer, worsening already weak productivity growth north of the border, it added.
Fraser of Allander lowered its forecast for 2016 gross domestic product (GDP) growth to 1.9%, from a November prediction of 2.2%.
It now anticipates GDP growth of 2.2% in 2017, down from 2.5% previously, as Scotland’s economic recovery continues to stutter and lower oil prices holds back growth.
The think-tank’s latest estimate for 2015 – GDP growth of 1.9% – was unchanged.
Brian Ashcroft, emeritus professor of economics at Strathclyde University, said sluggish recovery across the UK meant it was “not the time for the chancellor to adopt more austerity measures”.
Such a move in the March 16 Budget will only slow growth further and worsen the flow of tax revenues to the Exchequer, he warned.
He added: “Brexit might worsen Scottish productivity growth, particularly via negative effects on trade, inward investment and financial integration.”
Fraser of Allander said low oil prices were among the “significant threats” to economic growth north of the border, with a negative supply side impact overshadowing any positive effect elsewhere.
Paul Brewer, government and public sector partner at report sponsor PwC, added: “The potential for the forthcoming Budget to exert further fiscal tightening, oil prices and the uncertainty surrounding the potential outcome of the EU referendum together create a difficult environment for business and investor confidence.”