Scotland’s growth is set to slow further with low oil prices, according to an influential thinktank, and would be seriously threatened by Britain leaving the European Union .
The Fraser of Allander Institute’s latest economic commentary said Scottish growth is set to decelerate with falling oil prices having a net negative impact on Scotland compared to the rest of the UK. It now predicted growth of 1.9% this year and 2.2% next year, downward forecasts from those issued in November last year.
Chancellor George Osborne was urged not to adopt further austerity to meet fiscal targets as slowing growth reduces tax revenues.
It warned that Brexit poses a real threat to Scotland’s future growth with the consequent loss of trade, inward investment and finance worsening already weak productivity growth.
There were positive influences including growing domestic demand and domestic inflation being close to zero.
Nominal earnings/income growth was picking up slowly and interest rates remained low.
Significant threats to Scotland’s economic growth lay with the low oil price producing a drag on Scottish growth, with negative supply outweighing a positive demand effect.
The longer than expected delay in the recovery of oil prices was dampening overall investment expenditure.
Other factors included net trade continuing to be strongly negative, exacerbated by slowdown in China and a slowing of the growth of world trade.
The institute said it was difficult to imagine that Brexit would help Scotland’s competitive position with respect to trade with the EU.