Scotland likely to be in recession in early 2023
Scotland is likely to fall into a recession early in the new year as inflationary pressures squeeze demand in the economy, according to a key research group.
The Strathclyde University-based Fraser of Allander Institute believes the last two quarters of the year and the first quarter of 2023 will show contractions in the economy due to wider economic challenges.
It is forecasting growth of 3.6% for 2022, followed by a contraction of -0.6% in 2023, before returning to growth in 2024 of 0.8%. This is a significant downward revision from the Institute’s forecasts in June.
Professor Mairi Spowage, director, said: “The data we analyse in the Commentary today points to weakening demand in the economy as inflationary pressures pervade every aspect of our lives.
“Consumer confidence is starting to weaken with attitudes on the outlook looking pessimistic. This has led us to reduce our forecasts for 2023 and 2024.
“Our assumption is that there will likely be contractions in the economy during the second half of 2022 and into 2023 given wider economic conditions. In practice, this means Scotland is likely to enter a recession.”
Angela Mitchell, senior partner for Commentary sponsor Deloitte in Scotland, said: “Many business leaders have never navigated their business, and its people, through a period of such high inflation and weakening economic activity.
“Unlike during the pandemic, however, there is an opportunity to plan and prepare now for the months ahead.
“Business leaders will naturally want to focus on responding to the most immediate challenges, but they should also consider what they want their business to look like beyond the current challenges.
“Longer-term thinking, building in resilience and working towards creating an organisation that is fit for the future, will help businesses not only to recover, but to thrive.”