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Shock warning of virus impact

Lockdown may see Scottish economy shrink by 25%

St James development Edinburgh

Construction facing a big hit

Scotland’s economy could shrink by a quarter if the current coronavirus lockdown remains in place for three months.

The construction industry is facing the biggest hit and could contract by as much as a half.

The Fraser of Allander Institute insists this is not an “exact prediction” for GDP in the second quarter of the year (April-June), but an illustration of the scale of the “shock” facing Scottish growth.

The Strathclyde University-based think tank says that if current restrictions continue for a three month period Scottish GDP could contract by around 20-25%.

But it is not an exact prediction because no one knows how long the restrictions will last and whether their nature will change.

The scale of this shut down and therefore the impact are completely unprecedented, says the FAI.

“Whilst it is possible to use other assumptions about the possible scale of the ‘shock’ to individual businesses and sectors, any reasonable set of assumptions – given the size of the sectors being impacted – points to the impact being very large.

“Production and Construction will be harder-hit than Services overall, although parts of retail, Accommodation and Food Services and transport are will be most severely impacted.

“Of course, many of these effects will be temporary. Once restrictions are gradually lifted, then we should see some of these sectors bouncing back. To what extent, we don’t yet know. As we pointed out here, it is likely to be a long-road to recovery.

“We should all keep in mind how these effects will be captured in early measurement: it might be many months or even years before we actually know the full extent of the effect of the shut down on the Scottish economy.”



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