The Scottish Fiscal Commission, Scotland’s official forecaster, today published its evaluation of the economic and fiscal forecasts for the Scottish Budget which it published in early February 2020 – a month before the first COVID-19 lockdown.
The nature and scale of the policy response to the public health crisis, including the introduction of some new tax and social security policies, was both unprecedented and frequently varying in the light of rapidly changing health data. Some of the normal links between employment and GDP broke down.
Consequently the Commission’s February forecasts had very large divergences from the outturn data. In February 2020, the Commission forecast the Scottish economy would grow by 1.0 per cent in 2020. The latest data shows that COVID-19 and the associated public health restrictions led to the Scottish economy shrinking by 9.6 per cent in 2020, a forecast error of -10.6 percentage points.
However once the effects of COVID-19 are removed the remaining divergences in the Commission’s forecasts are small.
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.”
ENDS
Notes:
1. The Commission’s Forecast Evaluation Report 2020-21 is now published on its website. Background information is also available including spreadsheets with data for all the report’s tables and charts.
2. Today’s report evaluates the Commission’s social security, LBTT and SLFT forecasts against available outturn data. The Commission will publish its evaluation of its Non-Domestic Rates and 2019-20 income tax forecasts at 9:30 AM on Thursday, 26 August 2021. The outturn data were not available to be included in the current report. The Commission will also publish its next full set for forecasts for Scotland on that date.
3. The Scottish Fiscal Commission is the independent fiscal institution for Scotland, established by the Scottish Fiscal Commission (2016) Act. The Commission’s statutory duty is to provide the independent and official forecasts of Scottish GDP, devolved tax revenue and devolved social security spending for the Scottish Government to use in its budget and financial planning. The forecasts also assist Parliament’s scrutiny of the Scottish Budget and Budget Bill.
4. The Commission’s analysis represents the collective view of the Scottish Fiscal Commission, comprising the Commissioners: Professor Francis Breedon, Professor Alasdair Smith, Professor David Ulph, and the Chair, Dame Susan Rice.