Scottish economic bulletin: August 2025

Economic Outlook

Global and domestic headwinds are weighing on the economic growth outlook.

• Growth is forecast to slow this year at a global and domestic level. Most recently in July, the IMF forecast global growth to slow from 3.3% in 2024 to 3.0% in 2025 and 3.1% in 2026.^[20] This reflects a slight upward revision from previously forecast, however downside risks from higher tariffs, trade uncertainty and geopolitical tensions remain significant.
• At a UK level, the latest HMT average of new independent UK forecasts shows that UK GDP growth is expected to moderate slightly to 1.1% in 2025 before slowing to 1% in 2026 while inflation is expected to average above target in 2025 and gradually ease back in 2026.^[21]
• The average economic growth forecasts remain unchanged from June however the inflation forecast for 2025 has increased from 3.1% to 3.3%, likely reflecting the sharper than expected increase in inflation in June.

• In Scotland, in May, the Scottish Fiscal Commission (SFC) forecast Scottish GDP growth to slow to 1.1% in 2025, down from 1.2% in 2024, before rising to 1.8% in 2026 and 1.7% in 2027. This is a more moderate outlook for growth than previously forecast in December, reflecting a similar pattern of downward revisions to UK and global growth forecasts.^[22]

• Most recently, in July, the Fraser of Allander Institute revised down its forecasts for Scottish GDP growth for 2025 to 0.8% before rising slightly to 1% in 2026 and 1.1% in 2027.^[23]
• Overall, the growth outlook continues to reflect the downside risks from the sharp increase in global economic uncertainty alongside the slight softening in GDP growth during the second quarter, ongoing cost challenges and softening in some labour market indicators. Business and consumer sentiment remains subdued, however latest data indicates a greater degree of resilience in some business activity and optimism indicators in recent months.