Scottish economic bulletin: December 2025

Economic Outlook

Latest economic growth forecasts indicate a slight softening in growth next year.

• The OECD’s latest global Economic Outlook sets out that the despite stronger-than-expected resilience this year, the economic outlook remains fragile. Global GDP growth is projected to have slowed this year to 3.2% (from 3.3% in 2024) and is expected to slow further in 2026 to 2.9% as earlier activity unwinds and the impacts of higher effective tariffs continue to feed through. Growth is then projected to edge up in 2027 to 3.1%.^[35]
• Risks to the global outlook also remain from elevated geopolitical and policy uncertainty, however easing inflationary pressures and improving financial conditions are expected to be supportive of growth recovering in the latter part of 2026.
• At a UK level, the OECD project UK economic growth of 1.4% in 2025 (up from 1.1% in 2024) before slowing to 1.2% in 2026 and rising only slightly to 1.3% in 2027, as fiscal tightening and global uncertainty continue to weigh on activity.
• This pattern is consistent with the OBR’s latest UK forecast, published alongside the UK Budget, which forecasts UK GDP growth to pick-up to 1.5% this year before easing to 1.4% growth in 2026 and stabilising at 1.5% from 2027. This presents a downgrade to the medium-term growth outlook from their March 2025 forecast (-0.3 p.p) reflecting weaker productivity growth, albeit that upward revisions to real wage growth and inflation partially offset this.^[36]
• More broadly, the latest HMT average of new independent UK forecasts from November showed that UK GDP growth is projected to strengthen to 1.4% in 2025 before slowing to 1.2% in 2026.^[37]

• Looking ahead, inflation is generally projected to have peaked in the third quarter of this year and is now on downward trajectory to around 2.3% in the fourth quarter of 2026 before returning towards the Bank of England’s 2% target in the first half of 2027.
• There remains uncertainty about the pace at which inflation will ease over 2026, partly reflecting domestic factors around the extent to which wage growth and inflation expectations will moderate, alongside how international geopolitical factors may impact global commodity prices and further developments in global trade policy.
• For Scotland, the Scottish Fiscal Commission (SFC) forecast in May Scottish GDP growth of 1.1% in 2025 rising to 1.8% in 2026. In the short term, this is broadly in line with the more recent forecast from the Fraser of Allander Institute in October which forecast growth of 1.0% in 2025 before remaining more subdued in 2026 (1.0%). The SFC will publish their next forecast alongside the Scottish Budget in January 2026.^[38],[39]