What do the latest statistics on economic growth tell us?

The latest figures on Gross Domestic Product (GDP) in Scotland, for 4th quarter 2017, were published today by the Scottish Government. They show that the Scottish economy grew by 0.3% over the quarter and by 1.1% over the year. As shown in the following chart, growth over the quarter and year were both below that of the UK.BLOGImageTemplate_GDP growth Q4 2017Is Scotland’s economic performance improving?

As well as total GDP growth rates, the Scottish Government provides figures showing GPD per person, or GDP per capita. These allow us to compare economic output over time whilst stripping out some of the impacts of population change. The GDP per head figures in the release are presented in a “chained volume index”. This means that they show percentage growth in real terms, i.e. adjusted for inflation.

Figure 2 shows how GDP per head changed in Scotland between 1998 and 2017 compared to the UK as a whole. Over this period, the UK has seen slightly stronger growth than Scotland. Most of the growth, in both Scotland and the UK, came between 1998 and 2007. Growth was sluggish from 2007 onwards for both Scotland and the UK, with GDP per head not recovering to pre-recession levels until 2014 in Scotland and 2015 in the UK.BLOGImageTemplate-09Scotland as a region, compared to other UK regions

 

While seeing how Scotland compares to the UK is important, it is also interesting to see how performance compares with other nations and regions of the UK.

The Office for National Statistics (ONS) publishes regional GVA estimates, which include GVA per head figures by region. There is a slight time lag with these figures, so the most recent series goes up to 2016 only. GVA is also known as GDP at basic prices, and is a measure of the total value added by all industries in the economy, but excludes the value of taxes or subsidies on products (such as VAT and excise duties). For more information on GVA, see the SPICe guide to Gross Value Added (GVA) in Scotland.

Figure 3 shows the growth in GVA per head for all nations and regions of the UK, presented in real terms between 2007 and 2016. Scotland saw the third highest increase in GVA per head with only the South East and the West Midlands of England seeing higher growth. The data also shows that in 2016 Scotland had the third highest GVA per head of all UK regions.BLOGImageTemplate_GVA growth by region 2007 to 2016 real

What would GDP per head look like if it had kept growing at the same rate as between 1998 and 2007?

GDP per in Scotland started to fall between 2006 and 2007 and then continued to fall until 2010. Between 1998 and 2006 the average annual growth in GDP per head was 2.3%, so what would have happened if GDP per head had continued to increase at this rate? Figure 4 shows that if GDP per head had increased at the same average annual rate as between 1998 and 2006 it would have been 27% higher than it currently is.    BLOGImageTemplate-11 Andrew Aiton, Data Manager, Financial Scrutiny Unit