Restrictions may be drag on economic recovery
Impact of Omicron on the hospitality sector is yet to emerge
Omicron is casting a shadow over the Scottish economy’s recovery though it is expected to return to pre-pandemic levels in the Spring.
The Fraser of Allander Institute predicts growth of 6.4% in 2021 and 4.7% in 2022 and says the economy should be back to 2019 levels in May 2022, a month later than predicted in September.
However, the impact of the latest restrictions, particularly on the retail and hospitality sectors, will take some time to emerge.
Director of the Institute, Mairi Spowage, said: “The economy is in a better place than feared a year ago, underpinned by the delivery of the vaccination programme and the advancements made in understanding and treating the virus.
“As as we moved through the first half of 2021, the prospects for growth in the economy continually improved. Despite growth faltering in the Autumn due to rising prices and supply chain constraints, expectations are much better for the outlook in 2022 and beyond, compared to what was feared earlier in the pandemic.”
This quarter’s Commentary also finds the removal of the furlough scheme, has not had the negative impact on employment and unemployment that was feared.
However, there are initial signs that Scotland may be recovering more slowly than the UK as a whole, with both output and earnings data lagging the UK.
Ms Spowage, continued: “Despite the threat of the new Omicron variant, we have chosen to keep our forecasts broadly similar to those we produced in the Autumn.