Economic Commentary - March 2022

The Economic Commentary provides a monthly update on global, UK and Scottish economic trends, drawing on recent economic data as well as feedback from businesses.

The methodology consisted of desk research.

Recent global economic performance continues to vary according to the level of coronavirus restrictions present in each country, with the U.S. and Europe outperforming Asian economies at the start of 2022 after the latter was impacted by the arrival of the Omicron variant. The global economic outlook has been impacted by conflict in Ukraine, which could cut growth by more than a percentage point over the next year. Economies closest to the conflict are likely to be most impacted. UK GDP expanded by 1.0% in January and is now 0.8% above its pre-coronavirus level (February 2020). Recent business surveys suggest business activity has accelerated following disruption caused by the Omicron outbreak in December. The Scottish economy expanded by 1.3% in the final quarter of 2021, bringing annual growth to 6.9% (UK, 7.5%). Business activity also appears to have rebounded following the Omicron outbreak and easing of restrictions, but at a more modest pace than elsewhere in the UK. Demand for employees remains strong and 34,000 more workers in Scotland are now in payroll employment than before the pandemic. However, employment growth has been uneven across regions and lower than in the UK as a whole. Businesses across sectors continue to report inflationary pressures (rising energy, staff and raw materials costs), recruitment difficulties and some supply chain disruption. The biggest opportunities reported by businesses over the next year are increased demand for products and services as the economy recovers, the launch of new products and entry to new markets. The latest forecasts for the UK predict GDP growth of 4.0% or less in 2022, a slower pace than previously forecast amid a deteriorating outlook for consumer spending and a weaker-than-expected rebound in business investment.

This paper makes no recommendations.