FORECASTS for Scotland’s economy remain positive with estimated projected growth of around one percent this year and next, according to a new report.

Chief economist Dr Gary Gillespie’s State of the Economy report says that while the oil and gas sector has continued to weigh on growth in 2016, there are emerging signs of confidence returning to the sector.

His report outlines recent developments in the global, UK and Scottish economies, ahead of a debate today in the Scottish Parliament on “Opportunities for Growth”.

It also contains new Scottish Government analysis, drawing on a range of recent statistics, to quantify the impact that London has on various UK economic figures, and compares Scotland’s performance to both the UK total and the UK excluding London.

The report shows Scotland’s labour market has remained resilient, with unemployment below the UK figure and falling over the past year.

Gillespie says Scotland is still the most attractive part of the UK, outside London, for foreign direct investment (FDI), as it has been for the past five years.

Business sentiment has also improved, particularly manufacturing, though Brexit continues to create what is described as “substantial uncertainty”.

Since 2010, the report shows Scotland’s GDP growth is in line with the UK average and our GDP per head growth is above the UK average, when London is excluded.

Speaking ahead of the debate, Economy Secretary Keith Brown said: “This report confirms that the foundations of Scotland’s economy remain strong.

“2016 was a record breaking year for foreign direct investment into Scotland. According to EY, for the second year in a row we have attracted more projects than ever before and Scotland has been the top UK region outside London in every one of the past five years.

“New analysis in the report reveals that in the five years since 2010, Scotland’s GDP growth is in line with the UK average and Scotland’s GDP per head growth is above the UK average, when London is excluded.

“This reflects the fact that London’s economy, with its concentration of corporate and financial activity, is distinct from all other parts of the UK and has a significant impact on UK performance indicators.”

Brown added: “That said, growth is slower than we would like to see and the UK Government’s stance on Brexit presents a huge threat to jobs and prosperity in Scotland.

“We will continue to do all we can to support growth.”

The report said that last year, the Scottish economy grew 0.4 per cent, with 1.8 per cent growth in the service sector offsetting contractions of 3.3 per cent in construction and 4.4 per cent in the production sector.

Quarterly growth remained subdued across the year, with output contracting 0.2 per cent in the final quarter.

Business services, along with finance and distribution, hotels and catering drove service sector growth in 2016, but growth was flat in the fourth quarter.

This was driven by contractions in business services and finance and in household-facing services such as retail and accommodation and food services.

“The Production sector contracted throughout 2016,” said the report. “This partly reflects the continued impact of the slowdown in the oil and gas sector on its supply chain.

“However, in the second half of the year the contraction was more widely spread throughout the production subsectors.

“Whilst output levels in the construction sector remained significantly higher in 2016 than they were in 2014, the sector contracted throughout 2016, ending the year contracting 0.8 per cent in Q4.”

The report also considers immigration and Scotland’s economy, in the light of a Scottish Government analysis of EU nationals living and working here.

It showed that in 2015 there were 181,000 non-UK EU nationals living in Scotland, representing 3.4 per cent of the population — a significant rise over recent years and more than double the 2007 figure.

The analysis highlighted a number of differences in the makeup of EU nationals in Scotland compared to the population as a whole.

First, they were generally younger, with almost half aged between 16 and 34 while only around a quarter of the Scottish population is in this age group.

This was particularly important given Scotland’s ageing demographic, and gave companies access to the staff they need to operate and expand their business — mitigating the effect of the population change.

EU nationals were also more likely to be in employment. In 2015, the study pointed out that the employment rate for EU nationals was 78.9 per cent — higher than the overall employment rate for Scotland (73.1 per cent).

They also had a lower inactivity rate (16.2 v 22.3 per cent) than Scotland as a whole and were more likely to hold degree level qualifications.

Over a third of EU nationals hold degrees, compared to just over a quarter of Scotland’s wider population.