Page last updated at 17:05 GMT, Wednesday, 24 February 2010

'Weak recovery' for Scots economy

Shoppers earlier this month in Glasgow
Lower household spending has cast doubt on the strength of the recovery

The Scottish economy will return to positive growth in 2010 but the recovery will be weak, according to a leading economic think tank.

The Fraser of Allander Institute said there were positive signs such as a pick up in exports.

However it warned that household spending would continue to fall and there was the prospect of further fiscal tightening in 2010.

The report said there was now a greater increase of a double-dip.

The Fraser of Allander report offered three different scenarios for the Scottish economy next year.

Its central prediction of growth of 0.6% in 2010 was significantly more optimistic than the one outlined in its last report in November.

Recession end

In 2011, it said it expected the economy to rise by 1.6% and by 2.2% in 2012.

Brian Ashcroft, Professor of Economics at the University of Strathclyde, said: "A weak recovery for the Scottish economy is in prospect, supported by a gradual improvement in the growth in exports and investment.

"But, given relatively flat household and corporate spending, the ending of quantitative easing this month and the likely continuing sluggishness of bank lending, the prospect of a further fiscal tightening in 2010, all increase the risk of a double-dip recession later this year and perhaps next."

The institute said that survey evidence for the final quarter of 2009 had "cast some doubt on the strength of the recovery".

Weak house prices and rising unemployment meant that many households were saving more.

The UK came out of recession in the fourth quarter of 2009 but the Fraser of Allander Institute has questioned whether Scotland will do the same.

Official data is not published until April.

In its forecast, the institute said there was "concern that the Scottish economy faltered in the fourth quarter".

However it said that the "Scottish economy went into recession one quarter later than the UK and it may be that Scotland will come out of recession later too".



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