SCOTLAND'S economic growth will slow this year as the impact of the credit crunch on financial services ripples out to other sectors of the economy, Ernst & Young's Item Club has warned.
Tough market conditions, the impact of interest rate rises before last week's cut, and slower public spending prompted the respected forecaster to cut its prediction for Scottish growth back to 1.8% next year, compared to 2.4% this year. Item predict
s Scotland will continue to lag the UK economy which will grow by 2.1% in 2008.
Dougie Adams, economic adviser to the Scottish Item Club, said: "Clearly a decline in predicted growth is a disappointment for Scotland and there are some serious concerns around the impact of the credit crunch on the UK and the Scottish economy next year."
The Scottish financial services sector will see a sharp slowdown in growth, falling to 2.9% next year against a trend rate of over 7% a year over the past decade. Item predicts financial services jobs growth will stall until 2011.
But the group is more upbeat about prospects beyond 2008, predicting that Scottish growth will pick up on the back of the stronger UK economy to an above average rate of 2.2% in 2009 and 2.6% in 2010. The UK will grow by 2.5% in 2009 and 3% in 2010 as interest rate cuts feed through and the fallout from the credit crunch fades.
Adams said: "The Scottish consumer appears to be in better shape than in the rest of the UK and that despite below-trend growth next year we are still forecasting the creation of nearly 15,000 new jobs over the next 12 months."
Scottish consumer spending is expected to see little impact from the credit crunch and a slowing economy next year and while a slowdown in the housing market is likely, Item does not expect a price crash.
The full article contains 325 words and appears in Scotland On Sunday newspaper.
