However, it declared that, in spite of this revision, “growth expectations remain positive over the medium term”, with Scotland’s gross domestic product growth forecast at 1% in 2027 and 1.1% in 2028. Fraser of Allander had projected growth of 1.2% in Scotland in 2027 in its February forecasts.
The think-tank said: “While recent indicators suggest the economy has maintained momentum, experience from previous shocks highlights that the full effects of geopolitical disruption often emerge gradually, as pressures feed through energy markets and prices.”
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Mairi Spowage, director of Fraser of Allander, said: “While recent indicators have encouraged a more optimistic narrative around Scotland’s growth prospects, it would be premature to assume this momentum is secure.
“The conflict in the Middle East reminds us how quickly geopolitical risk can translate into economic pressure, particularly through energy markets.”
She added: “At a time when UK inflation had begun to stabilise and the economy was showing signs of recovery after several challenging years, this renewed shock means the outlook remains highly uncertain, with many of the potential impacts yet to be fully reflected in the data.
“The experience following Russia’s invasion of Ukraine in 2022 should remain fresh in our minds. That period demonstrated how prolonged disruption to oil and gas markets can drive inflationary pressures, tighten financial conditions, and ultimately weigh on economic growth. The lesson for Scotland is not that a downturn is inevitable, but that today’s positive outlook must be approached with caution.”