Scotland’s GDP is expected to grow by 4.8% this year, according to new analysis by KPMG UK.
With Omicron posing a milder setback than earlier strains, KPMG said it expects all of the British nations and regions to reach their pre-COVID levels of output in line with the UK.
KPMG said Scotland’s growth is then expected to moderate and settle at more typical levels of 2% growth in 2023.
According to KPMG’s UK Regional Economic Outlook, Scotland’s economy contracted by 9.7% over 2020, broadly in line with the UK average, and in 2021 Q3 GDP was still 1.9% below its pre-pandemic level.
However, momentum gathered at the end of 2021, with monthly data for October 2021 showing that GDP was just 0.4% below its pre-pandemic level.
“Now the loosening of pandemic restrictions, which have up until now been more stringent than in England, are expected to help encourage growth in Scotland’s economy,” said KPMG.
KPMG UK Chief Economist Yael Selfin said: “Our latest analysis suggests that the Omicron variant has not impacted growth significantly in Scotland.
“However, rising taxes and borrowing costs, as well as elevated inflation, will squeeze households’ purchasing power.
“And at the same time, the lingering effects of supply chain bottlenecks together with a persistent shortage of labour could constrain production this year.
“Nevertheless, after a relatively weak start to 2022 brought about by Omicron, growth should pick up from March, with overall GDP growth in 2022 reaching around three-quarters the rate of last year in Scotland.”
James Kergon, senior partner in Scotland for KPMG UK, said: “Ensuring our economy continues to grow is the only way to make sure Scotland comes back stronger after the pandemic.
“Our latest estimates are welcome news, especially for businesses in retail, travel and hospitality who have been the hardest hit in recent months.
“While there are signs of optimism for some, there’s no doubt that 2022 will be another challenging year for some sectors.
“It’s my hope that we can kick start a post-pandemic growth, and make sure that Scotland’s businesses can focus on long term growth, rather than survival.”
Vishal Chopra, head of tax for KPMG UK in Scotland, said: “Businesses will welcome a return to pre-pandemic levels of growth this year, however a broader ‘levelling up’ of the UK economy will require further initiatives and investment and may take a decade or more for any major changes to be firmly embedded in Scotland.”