The lifting of lockdown restrictions and a positive outlook for manufacturers and oil and gas firms in 2021 “will spark a stronger than previously projected lift-off for the Scottish economy this summer” — according to the latest analysis in KPMG’s UK Economic Outlook.
Scotland’s GDP will grow 6.4% in 2021 — up from the 5.5% forecast in March — allowing the Scottish economy to reach its pre-Covid level by the first quarter of 2022.
The KPMG report said Scottish growth will be supported by manufacturers that benefited from increased investment during the early stages of the pandemic and by oil and gas businesses experiencing an increase in global demand and rising oil prices.
Looking further ahead, KPMG said that once Scotland regains its pre-pandemic level of output in early 2022, services firms are expected to underpin more consistent growth.
KPMG predicts Scottish financial and business services firms will be the main contributor to national GDP growth in long term, with the relative lesser impact of Brexit on Scotland’s financial services sector compared to London an important factor.
Catherine Burnet, chair for KPMG in Scotland, said: “Our latest analysis shows that the pace of Scotland’s economic recovery is accelerating as restrictions ease, while the performance of two of our most important sectors – manufacturing and oil and gas – drives us further forward.
“How quickly we move along the Scottish government’s roadmap out of lockdown over summer could have an impact on our projections, but it’s still incredibly encouraging to see GDP growth could return to pre-pandemic levels by the start of next year.”
Burnet added, however: “We cannot forget that some sectors of the Scottish economy, such as tourism, hospitality and retail, have been more acutely affected by the pandemic than others.
“The end of government support schemes may coincide with a rebound in demand for these sectors, but there is still a steep hill to climb to overcome the disruption created by Covid-19.
“This challenging environment, combined with factors such as rising cost pressures, could slow Scotland’s economic recovery down.”