Scots have been warned to get used to a climate of low growth in the years ahead as the country struggles to bounce back from the economic crash of a decade ago.
There are “many, many strengths” in the economy, according to the country s economic watchdog, with the revival of the oil and gas industry likely to provide a much needed boost to longer term GDP.
The Scottish Fiscal Commission warned in a report this week that GDP growth will remain below one per cent for the next five years as Scotland continues to lag behind the UK. And a slump in wages has resulted in tax forecasts being cut by £1.7 billion until 2023.
But Commission chair Dame Susan Rice, the former Lloyds TSB chief, insisted it’s not all bad news.
“We are talking about growth - it’s not rapid, it’s not fast, some of it’s happening in a year or two, but that’s better than something that isn’t growth, so that’s allright.
“For those of working age who are capable of working, the fact that we have very high employment levels and very low unemployment levels that’s good news on a personal level.”
This could “limit the capacity” of Scotland to expand the economy because more people are generally needed for this and slower population growth in Scotland could be a drawback.
“There could be good things to emerge out of this - it depends what hat you have on if you’re the employer or the employee,” The Commission chief added.
She said the revival of the North Sea oil and gas industry, driven by the rising oil price, may take time to feed through.
“As a business or as an industry it takes a while until they actually get their investment and growth plans going again. When they do, for us that should have a very positive impact on the onshore GDP. It’s not going to happen instantly but there are good tings we can hopefully look forward to.”
Fellow commissioner David Wilson said Scots must “manage expectations” about the level of prosperity they can look forward to.
“There are many, many strengths in the economy,” he said.
“There’s lots of positives at the moment. The key point that we have been saying, I think consistently for the last year or so, is it’s tempering our expectations of the idea that we’re rapidly getting back to the 2.5% growth that we saw in the 90s and early 2000s.
“It’s managing the expectations that we’re in a period of slower growth and recovering from the crash in 2008. Everybody’s finding that it’s taking longer than anybody expected.”
The emergence of greater automation and the digital economy could provide significant opportunities for growth beyond the next five years, Mr Wilson added.
But he said: “The timetable for recovering from the major dislocation that happened as a result of the crash is taking longer than anyone reasonably expected and that’s why we’re very specific in our forecasting that over the time period that we’ve looking at of the five year period we face challenges, but five years in a long-term horizon of economic growth is quite short-term.”