Scotland politics

Scots economic growth 'remains volatile' says economist

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Image caption Scotland's John Swinney believes the UK government needed to kick-start the economy

The Scottish government's chief economist has warned that growth north of the border is likely to remain volatile for the foreseeable future.

In his state of the economy report, Gary Gillespie said the strength of the Scottish recovery "would depend on the pick-up" in the global economy.

He added that Scottish output rose by 0.2% in the first quarter of 2011 and by 0.1% in the second quarter.

Mr Gillespie said that globally the outlook "remains uncertain".

The economist believed that key to the recovery at both a global and UK level was a "swift resolution to the debt crisis in Europe".

He added: "This will depend upon markets gaining confidence in the ability of European governments to kick-start their economies, while restoring their public finances to health."

The report acknowledged that the Scottish labour market had performed more strongly than the UK as a whole over the last year.

Employment in Scotland had risen over the year by 14,000 and the majority of business surveys continued to report an increase in activity through the summer of 2011.

The report said: "The Bank of Scotland PMI indicator - one of the most robust early indicators of performance in the Scottish economy - has now reported 10 consecutive months of expansion in private sector output."

On a global level, recovery is expected to continue but there was now "much greater uncertainty over the pace of growth".

Mr Gillespie's report, covering the year up to November, added: "Indeed there are fears, particularly amongst Euro Area economies, that there could be a double dip recession toward the end of 2011 and into early 2012."

He went on to say: "As a small open economy, the strength of the Scottish recovery in the months ahead will depend on the pick-up in the global economy and the ability to increase our share of global investment and trade.

"Forecasts for the Scottish economy should be viewed with some significant health-warnings and can become quickly out of date, as figures are revised to reflect ever-changing developments.

"The most recent forecast - produced by the Fraser of Allander Institute - predicts that Scotland will grow by 0.4% in 2011, before growth increases through 2012 and 2013. Other earlier forecasts are more positive."

'Heed warnings'

Scotland's Finance Secretary John Swinney said Mr Gillespie's report was "yet another stark warning to the chancellor".

He added: "There is no doubt that UK economic growth will remain uncertain for the foreseeable future, as the economy continues its fragile recovery.

"While the Scottish labour market continues to outperform the UK as a whole - with lower unemployment, higher employment, and lower economic inactivity rates - we must ensure that growth is sustained.

"The improvement in the Scottish labour market over the past year has been encouraging - and we are taking action on youth unemployment and skills - but the report notes that further improvements will depend on the ability to boost output and generate new demand and employment opportunities.

"The chancellor must heed the warnings and use his Autumn Statement to take urgent action to stimulate the economy and boost growth, improve access to finance and enhance economic security."

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