Forecasts of the Scottish economy [March 2006]

There has undoubtedly been a slight slowing in the world economy but it is more marked in the US than elsewhere. Japanese performance was better than expected however and has offset the deterioration in the US. While the Euro Area remains relatively weak there are clear signs of a strengthening of activity and a modest recovery is taking place. The US is forecast to grow by 2.9 per cent this year, Japanese growth is forecast to be 2.3 per cent and the Euro Area forecast is 1.9 per cent. Inflationary pressures have been building as oil prices have surged but there are few signs of this passing through to wage bargains and over the next year as monetary policy is further tightened; inflationary pressures are expected to abate.