Forecasts of the Scottish economy [April 2007]

Growth in the world economy remains relatively strong despite a significant rise in oil prices and a slight slowing in the US. China and Indian continue to grow very strongly while Euro Area performance is better than was expected. Inflation in most economies has moderated since the third quarter of 2006 as energy prices have declined significantly. Survey evidence in the world economy is positive and encouraging. Exchange rates are of little concern just now and the main risks to the economy continue to be a further sustained rise in oil price, global imbalances and spillovers from the US housing market slowdown to asset markets. The latter would significantly affect growth across the developed economies.