Scotland politics

Growth in Scots economy 'slowed significantly' in 2015

Scottish banknotes Image copyright AFP
Image caption Growth for 2015 remains at just below 2%, following three years of steady growth

Growth in the Scottish economy remains positive despite the pace slowing significantly in the second quarter of 2015, according to the chief economist.

Dr Gary Gillespie said growth was still forecast at just below 2% for the year, following three years of steady growth.

However, he warned of a "challenging" environment, particularly in the oil and gas sector.

Finance secretary John Swinney said Scotland had "remained resilient" despite "increased global headwinds."

Dr Gillespie's tri-annual "state of the economy" report said quarterly growth was 0.1%, with annualised growth at 1.9%. Growth for the UK as a whole in 2015 is forecast around 2.4%.

Household expenditure and investment were key drivers in the Scottish market, with construction activity in particular surging.

However, he warned that there had been "substantial reduction in investment intentions" in the oil and gas sector, "impacting directly on employment and the wider supply chain".

2016 outlook

The outlook for the sector in 2016 remains "challenging" while oil prices remain low, and a fall in global commodity prices has also hit steel and paper production.

A strong rate of employment growth in recent years has levelled off, with unemployment stabilising at pre-recession levels.

Dr Gillespie said: "The external environment remains key to the outlook in 2016 for Scotland both in terms of global demand, in particular China, and the impact of monetary tightening in the US on wider global economic sentiment.

"The legacy from the financial crisis of 2008/09 is a much more inter-dependent and fragile global economic system which transmits the impact of economic changes through the global economic system. As an open economy, Scotland is not immune to these impacts."

The chief economist noted that growth should be more "broad-based" in 2016, with more private sector expenditure balancing out public sector investment and improved productivity driving export growth.

He said: "The labour market remains strong, and whilst there are headwinds from the external environment the outlook overall at this time remains positive."

Image copyright Andrew Cowan/Scottish Parliament
Image caption John Swinney presented his 2016 draft budget to MSPs earlier in the week

Deputy First Minister John Swinney said the Scottish economy had "remained resilient even in the face of increased global headwinds", continuing the longest period of continuous quarterly growth in the Scottish economy since 2001.

He said: "Recent data has shown that Scotland's economy has been performing well over recent years, with output and employment above their pre-crisis levels. Our economy, however, is facing a number of external challenges and the pace of growth has therefore slowed during the second quarter of the year.

"The UK government retains control of the main economic and tax levers affecting the North Sea oil industry, and we urge them to do all they can to assist the sector. We are doing all we can within our devolved powers, having set up the Energy Jobs Taskforce to help protect employment in the industry and to drive forward innovation and new ways of working.

"Our prioritisation of public infrastructure spending throughout 2015 has also been a strong contributor to growth in Scotland during this period."

He added: "The Scottish government will continue to work with businesses to focus on growing the economy and promoting Scotland as a great place to do business."

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