Covid in Scotland: KPMG says economic recovery 'accelerating'
- Published
KPMG predicts Scotland's economy will be boosted in part by growth in oil and gas
Scotland's economy could return to pre-pandemic levels by the first quarter of next year, according to a new report.
Analysis by KPMG has suggested Scottish GDP will be boosted by the lifting of Covid restrictions and growth in manufacturing and oil and gas.
Its latest forecast indicates GDP will grow by 6.4% in 2021 - up from its 5.5% forecast in March.
KPMG said its analysis showed that the pace of Scotland's economic recovery was "accelerating".
The company revised its growth projections for 2022 slightly downwards, from its forecast of 5.8% in March to 5.2%.
However, it said that once Scotland regained its pre-pandemic level of output in early 2022, services firms were "expected to underpin more consistent growth".
In its report, KPMG said growth this year would be supported by manufacturers who benefited from increased investment during the early stages of the pandemic.
Oil and gas businesses will also see growth over 2021 as a result of an increase in global demand and rising oil prices, it added.
The report also predicted that Scottish financial and business services firms would be the main contributor to national GDP growth in the long term.
It attributed that, in part, to the "relative lesser impact" of Brexit on Scotland's financial services sector, compared with London.
Catherine Burnet, head of 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."
Meanwhile, despite the positive forecast, KPMG said Scotland's GDP growth was projected to fall slightly behind the UK as whole during 2021 and 2022.
UK GDP is forecast to grow by 6.6% in 2021 and by 5.4% in 2022, with Scottish businesses facing the same potential challenges as firms across the UK.
'Steep hill to climb'
The report also warned that an expected rise in business insolvencies, as government support programmes are withdrawn, could impact recovery.
Ms Burnet said: "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."
- Published29 March 2021
- Published2 June 2021
