SCOTLAND is facing the “most severe economic downturn in modern times” as a result of coronavirus but experts said recovery from the pandemic could mean “the future may well be a lot brighter”.

While the Scottish economy is forecast to shrink by 6.8% in 2020, KPMG’s Scotland regional chairwoman Catherine Burnet said the financial services firm expects a “partial recovery” in the second part of the year as more restrictions are lifted.

The decline in gross value added (GVA) in Scotland is slightly less than the fall of 7.2% forecast for the UK but Aberdeen and Aberdeenshire are expected to endure a big hit, with drops of 8.6% and 8.5% predicted respectively. West Lothian is forecast to do best, KPMG says, with a predicted 5% economic decline in 2020.

With uncertainty about when a vaccine will be available, its economic modelling looked at four different scenarios.

Burnet said: “Considerable uncertainty remains around the timing of a vaccine, which will impact the timing and speed of the recovery as well as the extent of any permanent damage to the economy.

“There are some tentative signs of a pick-up in activity and we expect to see a partial recovery in the second half of this year as the gradual easing of restrictions brings light to more corners of the economy.

However, a full resumption of activity is unlikely until a vaccine or effective treatments for Covid-19

is found.”

Burnet added: “The pandemic will leave a lasting mark on the economy. We all need to adjust to a new future, not just the current recession and make the most of the hand we’ve been dealt to build something better for us all. That could be doing more to help the environment, investing more in our essential workers, or matching our universities with local businesses to improve regional productivity.

“If we get this right, the future may well be a lot brighter.”

Meanwhile, the UK unemployment rate is forecast to grow to 8.6% this year, then rise again to 11% in 2021. Figures showed a 63% increase in the number of Scots claiming unemployment benefits between March and April – slightly lower than the 66% UK average.

James Kergon, senior partner at KPMG UK in Glasgow, warned the winding down of the job retention scheme may have consequences for many workers throughout Scotland.

But he said the country’s economy having diversified significantly should help mitigate the impact from those sectors likely to be hardest hit, such as tourism and hospitality.

On the north-east of Scotland, Martin Findlay, senior partner at KPMG UK in Aberdeen, said: “The huge decline in global demand for energy during the pandemic has significantly impacted producers and, consequently, the supply chain.

“Companies are facing the prospect of significant headcount reductions or restructuring. However, there is always a glimmer of hope. We’ve been here before and Aberdeen, which has become accustomed to big rises and falls.”