The Scottish economy will continue to shrink next year, economic experts predicted today.
And unemployment could peak at more than 200,000 in 2010 before starting to fall, according at a report by Strathclyde University's Fraser of Allander Institute.
"The recession may have bottomed out but what is unclear is the timing of the recover
y," the institute's Professor Brian Ashcroft said today.
"Unemployment will continue to rise in the medium term.
"The adjustments required to ensure a favourable long-term recovery pose a challenge to Scottish Government policy as well as to the private sector in Scotland."
And any recovery will be "slow and protracted", he added.
It sets out three forecasts – high, central and low – for GVA (gross value added) growth between 2009 and 2012.
The three forecasts indicate that the slump will be at its worst this year with negative growth of between 1.9% and 3.8% but will start to recover next year – nevertheless all three scenarios indicate that the economy will continue to contract in 2010.
Economic growth will begin in 2011, according to the "high" and "central" growth predictions.
However, the "low" growth prediction says the economy will keep shrinking in 2011 by –0.2%, with 0.4% growth in 2012.
And the "central" prediction says unemployment will peak at 212,600 next year before starting to fall, although it will remain above 200,000 in the following two years.
Paul Brewer of PricewaterhouseCoopers, which sponsors the commentary, said: "There are some signs that confidence is slowly re-emerging in the corporate sector but the economic contraction over the past nine months has been particularly severe in a number of sectors."
The economy needs to be "more export and private sector-orientated" over the medium to long term in order to recover from the recession, according to the institute.
"The required switch towards exports puts a premium on the competitiveness of manufacturing, since goods still account for the bulk of exports," it stated.
"This poses a policy challenge to the Scottish Government and its economic development agencies."
And greater foreign investment is needed in Scotland, it said, because "Scotland's domestic business birth rate remains stubbornly low and business R&D (research and development) is amongst the lowest in the western world."
