Leader: Bleak growth forecast that must be heeded

THERE is much contentious assertion in the latest analysis from the Fraser of Allander Institute. But few would dispute its downgrading of forecasts for Scotland’s economy this year and next.

Despite the talk of a superior Scottish performance relative to the rest of the UK, we are now perilously near to recession. The institute has halved its growth forecast for this year to just 0.4 per cent, while it has cut its growth estimate for next year to just 0.9 per cent compared with a 1.5 per cent forecast previously. Both these are lower than the median of independent forecasts for the UK overall (1 per cent and 1.5 per cent respectively), while over the year to the second quarter, GDP growth lagged that for the UK as a whole.

If there is a “Plan MacB”, it isn’t working. While construction was stronger in Scotland over this period, service sector growth was just 0.1 per cent, compared with growth of 1 per cent in UK services. Within this total, business and financial services in Scotland are now showing particular weakness. Bleak though all this is, the institute warns the economy may be much worse off than suggested by the shorn estimates, due to permanent loss of output. There is little here to give the SNP administration any comfort, while the slowdown in the eurozone offers little prospect of any export-led recovery. The report itself could have been more forthcoming on policy suggestions rather than its contentious dismissal of key economic concerns as “myths”. Massive debt and an over-large public sector remain priorities for action.