Economic Commentary - February 2021

A summary of the global, UK and Scottish economies using the latest economic data available. The commentary also pulls insights from Scottish Enterprise managed companies and draws out some implications for policy makers.

The methodology consisted of desk research.

Key findings include: the IMF forecasts the global economy will grow 5.5% in 2021 as the rollout of COVID-19 vaccines and more government fiscal stimulus offset the immediate challenge posed by the resurgent virus; UK GDP contracted 9.9% in 2020, the largest annual fall on record, but is projected to recover strongly over 2021 as the vaccination programme leads to an easing of restrictions and an increase in consumer spending; recent business surveys suggest a significant setback in the recovery of business activity following the reintroduction of lockdown measures, despite most businesses remaining optimistic due to the rollout of COVID-19 vaccines; private sector activity in Scotland fell sharply and into an even steeper downturn in January, although the fall in activity was less severe than during the initial lockdown and business confidence rose to a near 7-year high; and the number of unemployed people in Scotland increased by 18,000 over the year to November, while claimant count unemployment increased by 96,400 people in the year to December.

Renewed lockdown measures are further challenging a Scottish economy still struggling from the original shock of COVID-19. Positive news around vaccine offers hope but recovery is likely to be gradual and may only gather pace when restrictions are fully eased. The end of the EU transition period has also seen some trade disruption and delays in the movement of goods, and may continue to have significant implications for the economy as it emerges from COVID-19.