SCOTLAND’S economy shrank by almost 10 per cent last year because of the lockdown forced on the country by the Covid pandemic, Holyrood’s budget watchdog said.
The Scottish Fiscal Commission said the dramatic and unexpected effect of the outbreak had led to its largest ever forecasting error.
In February 2020, the Commission forecast the Scottish economy would grow by 1% that year, but instead it fell by 9.6%.
The watchdog noted the emergence of Covid in China was a potential risk to global trade, but did not foresee the shuttering of large parts of the economy just weeks later.
In a forecast evaluation report, the Commission said it also over-estimated Scottish Government income from two devolved taxes - Land and Buildings Transaction tax and Scottish Landfill Tax - by £134m and under-estimated social security spending by £100m.
The upshot was an adverse error of £234m.
It will report the revenue and errors for income tax and business rates next month.
The group concluded that, although some of its errors were “particularly large”, the extreme circumstances may it hard to draw any lessons for future predictions.
It said: “We evaluate our forecasts with the aim of reducing our average forecast error by learning lessons from previous errors.
"However, the shock caused by Covid-19 is so unusual that it is hard to draw out useful lessons for the future.
"Shocks of this kind are a risk we can never fully control for in our forecast.”
Commission chair Dame Susan Rice explained: “Forecasts will never be wholly accurate because we can’t predict precisely what will happen in the future.
“The scale of the economic shock caused by Covid could not have been predicted when we made our forecasts, and the widespread effects on the economy and labour market will continue to make forecast modelling much more difficult for some time to come.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel