Summary of Key Conclusions
Recent Global Economic Developments
- Many advanced economies remain in recession, although the rate of decline in output in most countries has eased in recent months. Some countries such as France, Germany and Japan have recorded positive growth in Q2 2009.
- Weaker global output has led to a sharp rise in unemployment
- Spare capacity has contributed to a decline in inflation, with some countries experiencing a period of deflation
- Conditions in financial markets have improved, with less risk of a systemic collapse
Recent Scottish Economic Developments
- The most recent official data on the performance of the Scottish economy showed that output contracted by 2.4% in Q1 2009. This rate is consistent to that of the UK and other advanced economies
- To date, the recession has been broad-based, with nearly all sectors of the economy affected
- Unemployment rates have deteriorated markedly since the start of 2009 though they remain lower than for the UK as a whole. Employment has fallen sharply.
- Credit conditions remain constrained, with an increase in demand for credit coinciding with a fall in the availability of credit
Future Prospects - Global Economy
- Emerging evidence suggests that many economies will return to growth in the second half of 2009, as conditions in the global economy continue to improve
- However growth is forecast to remain weak for advanced economies into 2010, as the process of adjustment continues
- The UK economy is expected to follow a broadly similar pattern, contracting by around 4% in 2009, and growing very modestly in 2010 by less than 1%.
- Emerging economies are expected to drive the global recovery
- Considerable uncertainty remains over both the timing and the scale of the recovery
Future Prospects - Scottish Economy
- Business surveys suggest that the rate of decline in Scottish output eased in Q2 2009 and there are signs that weak growth may return in the second half of 2009
- Employment is expected to continue to decline throughout 2009 and into 2010 and this will be reflected in further significant increases in unemployment
- Forecasters predict Scottish output to decline sharply in 2009 by between 2.9% and 4.1%, with only very modest growth indeed expected in 2010.
August 2009