Further downgrade

Hope rests on vaccine for declining Scots economy

lock on gates at bar

Economy faces ‘greatest challenge’ (pic: Terry Murden)

Scotland’s economic growth will contract by 9.1% this year but a “high chance” of the pandemic being beaten next year could see it pick up to 8.2%.

It could take until early 2023 for it return to its pre-Covid level, according to KPMG’s latest quarterly economic outlook.

The latest analysis for this year sees a further downgrade of forecasts from the 8.1% predicted in June.

UK-wide, KPMG is forecasting an even steeper decline in GDP of 10.3% for 2020, downgraded from 7.2% predicted in June, with stronger growth of 8.4% in 2021.

Three alternative scenarios were considered for the timing of the recovery, based on potential different dates of the vaccine being approved and then rolled out in the UK – and a Brexit deal outcome.

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KPMG’s base scenario assumes that a vaccine will be approved in January, immediately reducing uncertainty, and rolled out by the end of April enabling all social distancing measures to be removed.

It also assumes the UK and the EU reach an agreement on their future relationship before the end of the transition period this year.

But even just a three-month delay in rolling out the vaccine could see UK GDP growth fall to 7.1% in 2021, instead of 8.4%.

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