‘Low growth or no growth’ ahead for Scottish economy
SCOTLAND’s economy faces either a low rate of growth or no growth at all for the rest of the year as the global financial crisis continues to affect jobs and investment prospects, a leading economist has warned.
The economy will continue to struggle after output growth slowed down last month, with a decrease in incoming new business for firms, according to Bank of Scotland chief economist Donald MacRae.
Mr MacRae’s gloomy economic forecast comes as the bank’s latest monthly Purchasing Managers’ Index (PMI) report said that cost inflation increased at a rate that was much faster than that seen across the UK on average.
Manufacturing and services show only marginally higher output compared with June and the rate of growth is slowing, the report claimed
Private sector firms recorded a small fall in the amount of new work in July, ending a run of increases stretching back to December, with the rate of new orders for manufacturers fell at a faster rate, which “offset” the marginal growth seen in the services sector.
Mr MacRae’s warning about the economic outlook came after it emerged last month that Scotland had fallen into a double-dip recession, with the construction sector shrinking by 7.3 per cent over the last year.
Mr MacRae said: “The July PMI suggests growth in the private sector of the Scottish economy was marginal, with a fall in manufacturing output offset by continuing growth in service activity.
“The Scottish economy is struggling to maintain growth momentum in the face of the global slowdown. Low growth or no growth is in prospect for the rest of 2012.”
Labour MSP Richard Baker seized on the forecast to launch an attack on the policies of the Scottish and UK governments as he claimed that the austerity measures pursued by Chancellor George Osborne were damaging the economy.
Mr Baker said: “It shows that the UK government’s strategy has been wrong and that George Osborne’s failure to bring in a plan ‘B’ has damaged the potential for a return to economic growth.
“The UK government’s programme of cuts is too fast and too deep and has chocked off recovery. The Scottish Government also has a lot more to do to help grow the nation’s economy and has to step up to the plate on this by using its powers to stimulate key sectors of the economy such as construction.”
The PMI report, based on data from questionnaires sent to 600 manufacturing and service sectors firm, suggests that businesses remain reluctant to take on staff because of falling demand and the uncertain economy.
Manufacturing production experienced a “solid decrease” during July, coming after two months of slight growth, the report shows. For the fourth straight month, orders fell.
A Scottish Government spokesman said: “This government is working tirelessly to strengthen the economy, with the powers we have, and our economic strategy is delivering results – Scotland has a higher employment rate than the UK, lower unemployment, and a stronger GDP performance than the UK over the past six months.”
However, Tory MSP Murdo Fraser, the head of Holyrood’s economy committee, defended the approach of the UK government and blamed the slow growth rates on the debt crisis in the eurozone countries.
Mr Fraser said: “Until we see much greater economic stability in the eurozone it’s going to be difficult for there to be sustained growth in the UK economy.
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