Clearer signs of a recovery are now emerging within the Scottish economy according to the latest Economic Commentary from the University of Strathclyde's Fraser of Allander Institute, sponsored by PwC.
But the Institute also notes that despite the recent good survey evidence the recovery so far is weaker than would be expected 5 years after a recession, even a recession generated by a banking crisis.
GDP growth is forecast to be 0.9% in 2013, the same as our March forecast, 1.6% in 2014, a lowering of the Institute's forecast in March, rising further to 2.1% in 2015.
Brian Ashcroft, Emeritus Professor of Economics at the University of Strathclyde, said, "The evidence of recovery is to be welcomed. Business services are now growing strongly and leading the way. Yet, financial services appear to have suffered a structural decline and manufacturing output and export performance is weak.
"The explanation for the welcome, but still anaemic, recovery 5 years since the start of recession is the UK government's fiscal consolidation programme and weak export performance reflecting both supply-side structural problems in the UK and Scottish economies as well as weak global demand."
Despite evidence of recovery, the forecasts reflect continued weakness of domestic demand, in particular government spending and consumer expenditure, and weak anticipated growth in the rest of the UK and Eurozone markets to which Scottish exports are so reliant.
Paul Brewer, senior partner at PwC in Edinburgh, commented, "The latest commentary emphasises the importance of investment as a major contributor to economic growth, particularly over the last three quarters.
"The pace of investment in energy assets, such as renewable generation and grid development, has picked up while manufacturing continues to claw its way back to its pre-recession peak. Scottish Government sponsored projects such as the New Forth Bridge Crossing, Edinburgh Trams and the affordable housing programme are also delivering an economic boost during their construction phase.
"Our cities are also increasingly recognising their role as a focal point of investment, helping to drive Scotlan'’s future growth. In Aberdeen, for example, the focus is clearly around developing and sustaining the energy supply chain resulting in public-private sector policies that will help deliver a supply of skilled people, greater connectivity and a modern infrastructure.
"As we continue along this path of slow, tentative growth one thing is certain: the most successful cities will be those whose strategies focus on innovation, digital connectivity and transport infrastructure, as well as improving factors such as income levels, the quality of jobs, health and housing."
Projected net job creation is 12,150 in 2013, rising to 28,200 in 2014 and 38,700 in 2015.
The unemployment forecast has been revised down somewhat from March, reflecting the weakness of productivity, and higher employment given the growth of output. Unemployment on the ILO measure at the end of 2013 is now projected to be 213,250.
The unemployment position is expected to deteriorate slightly in 2014 compared to 2013 due to relatively weak output and employment growth. Unemployment is now forecast to be 228,000 by the end of 2014 but then falls back to 189,350 by the end of 2015 as growth in the economy strengthens.
The full report is available here.