From the Fraser of Allander Institute Economic Commentary, Vol 41 No 1, published on 22 March:
- The UK economy continues to outperform expectations with growth in 2016 of 1.8% and a consensus forecast of near 2.0% growth in 2017.
- Scottish growth in 2016 is likely to come in around our post-EU referendum forecast of just 1.0%. Recent business surveys have started to show a pick-up in activity although overall conditions are still fragile.
- There remains a high degree of uncertainty around all economic forecasts at this time. In particular, the range of possible outcomes is much wider than normal given the number of ‘big’ political events – not least the Brexit negotiations and the prospects for a 2nd independence referendum – that cast a shadow over the outlook.
- The long-term implications of Scottish independence and the UK’s departure from the EU will be debated at length over the next 18+ months. Irrespective of the final outcome, the negotiation and referendum processes themselves will add an additional layer of uncertainty for business and act as a possible headwind to short-term growth prospects.
- In such uncertain times, we continue to recommend that just as much attention is given to the range of estimates that underpin this outlook as well as our central estimates. Our central forecast is for growth of 1.2% in 2017, 1.3% in 2018 and 1.4% in 2019.
Regarding the deficit:
Assuming similar levels of growth and current patterns of public spending, our own projections suggest that the deficit will remain in the 6% to 7% range by 2020.
That’s less eye-watering than the 9.5% deficit in 2015-16, but even 6%-7% would not be sustainable if Scotland were to become independent. The EU’s Treaty on the Functioning of the European Union, for example, sets a criterion of a deficit of no more that 3% of GDP. Of course, countries do run high deficits at times—including EU member states—but the aim is always to reduce them.
GDP per capita
The FAI report also calculates Scotland’s GDP per capita for 2015 and puts it alongside other OECD countries. The UK comes in 16th with $41,779. Scotland, with a geographical share of North Sea oil and gas (NSOG), is estimated to have a GDP per capita of $42,372 for 2015; with a population share of NSOG, this figure is $40,001.
We put the FAI’s estimates alongside a fresh pull of data from the OECD database, and—based on the FAI’s calculated figures—with a geographical share of NSOG (to consider the situation under independence), Scotland would be ranked 15th out of the 35 OECD countries in 2015. Please note that—as per the above screenshot from its report—the FAI has not given a number for Scotland in the ‘Rank’ column. We, however, couldn’t resist doing so.
Finally, with a geographical share of NSOG—and based on the FAI’s calculations—Scotland’s 2015 GDP per capita would be 104% of the OECD average of $40,807; 111% of the Europe average of $38,303; 110% of the EU28 average of $38,676; and 101% of the UK average of $41,779. Taking a population share of NSOG, these percentages are (respectively): 98%, 104%, 103%, and 96%. All figures have been rounded to the nearest whole number.