Fraser of Allander Institute: Economic Commentary [June 2014]

The Scottish economy is now enjoying a strong recovery, which is, however, subject to the risks of: a continuing unbalanced recovery; falling real wages; booming house prices in the London housing market, and deflation in the Eurozone. In 2013 Scottish GDP grew at 1.6% a little less than the 1.7% outturn in the UK. This suggests that without the loss of output due to the dispute at Grangemouth in October 2013, Scottish growth would have equalled that of the UK. Positive growth has now been recorded for the Scottish economy in the previous 7 quarters. But to reiterate our previous warnings: the recovery continues to be cons iderably weaker than that of any recession in the last 70 to 80 years (i.e since the 1930’s). In the fourth quarter, GDP in Scotland was -0.9% below its pre-recession peak, whereas UK GDP stood at -1.4% below its pre -recession peak of more than 5 years ago. However, due to the greater fall in UK output during the recession, recovery from the recession has been stronger in the UK.