Economy ‘could shrink by 33% due to lockdown,’ fiscal experts estimate
In a new report published on Tuesday, Gary Gillespie warned Scottish GDP could face an “unprecedented” drop of as much as 33% during lockdown.
He said that projections north of the border partially mirror those seen in the rest of the UK as a result of the outbreak.
The report also showed that 110,000 new claims for Universal Credit in Scotland had been filed since March 15.
Assuming the lockdown measures put in force will last for three months, the report suggests that the economy could contract by 10% in March and 25% for April, before beginning recovery in July.
The report said: “We estimate that during the current lockdown, output in the Scottish economy could fall 33%, primarily because of business closures and other impacts of social distancing.
“This result is close to that produced by the Office for Budget Responsibility (OBR) for the UK as a whole, and broadly in line with estimates and models for other countries around the world.”
Mr Gillespie’s State of the Economy report added: “Ultimately, the extent of the fall in GDP will depend on both the duration of outbreak and the impact of measures taken to mitigate its spread, both of which are difficult to predict.
“What is clear from all the available evidence and predictions is impact on the economy will be unprecedented in scale and experienced across most countries.”
Along with GDP, the labour market in Scotland has also contracted, seeing an increase of 110,000 in Universal Credit claims since March 15.
Around 67,000 of those claims, the report states, came in the two-week period to April 7.
Despite the increase, Social Security Secretary Shirley-Anne Somerville urged Scots to check if they were entitled to benefits during the outbreak.
She said: “It is welcome that people are claiming the support that they are entitled to from the DWP, and I would encourage people to look into what additional help is available. Even if you are not entitled to Universal Credit, there could be other assistance that you can access so it is worth checking.”
Employment indexes have taken their worst hit in 20 years in both Scotland and the rest of the UK, the report found, with a spike in “unemployment-related web searches” not seen since 2008.
While the report concluded that the economy and labour market in Scotland would recover from the coronavirus outbreak, a number of factors could influence the speed of the recovery, including the length of time the lockdown measures are in place for.
Economy Secretary Fiona Hyslop (left) with Nicola Sturgeon and John Swinney.
Economy Secretary Fiona Hyslop said: “Our response to Covid-19 is saving lives, but I am deeply aware that the pandemic is having an economic effect that is already being felt across Scotland.
“The Scottish Government is doing everything we can to support businesses at this very difficult time.
“We want Scotland to recover as quickly as possible from this outbreak, and that includes rebuilding our economy as quickly as is safely possible.
“None of us should be under any illusions about the scale of economic recovery and, as we have said before, no government will have all of those answers.
“That is why we have set up an independent advisory group to provide expert economic advice and this will be crucial to help us deal with the challenge of rebuilding our economy.”