The Scottish Government has an opportunity to "set a functional, pro-growth business agenda" as the leadership at Holyrood switches hands, according to a new report from EY.
The accountancy firm's latest forecast for the Scottish economy anticipates a 0.% rise in GVA, down on the previous quarter forecast of 0.7%.
It's also now expected to be weaker than the UK economy which is forecast to grow by 0.6%.
A chance to reset
EY Scotland Managing Partner Ally Scott said: "As the Scottish business community anticipates a policy reset from new political leadership, our forecast shows the economy remains marginally behind, but largely tracks, trends we see at a UK level.
"The deterioration at the end of the year was most strongly felt in the manufacturing sector which suffered a sharp decline in Q4, and while the services sector was largely flat overall, some private service activities show signs of improvement.
"Households and some business sectors appear to be gaining optimism about the year ahead, but recovery in household finances and spending will take time to feed through into growth.
"GVA growth is forecast to be weak this year but momentum is predicted to build for a brighter outlook for 2025 and beyond."
"While political distraction and instability is never welcome within the business and entrepreneurial community, Scotland currently has an opportunity to reset the sluggish trajectory of what many of our reports imply and set a functional, pro-growth business agenda that can enable and accelerate a more vibrant and sustainable economy for the longer-term."
Scottish lagging behind UK
EY's forecast for 2025 has improved to 1.7% from 1.4% with "sustained growth expected in the following years".
However, the UK economy is expected to grow 1.8% in 2025 and the same in 2026, and 1.8% the year after.
Employment growth is also expected north of the border but is forecast to remain below UK levels. It's expected to rise in Scotland by 0.8% this year and next, while it's expected to rise by an average of 1.1% in the UK over the same period.
EY Scotland Managing Partner for Financial Services Sue Dawe said: "Scotland’s employment is expected to rise as conditions improve through the year with sustained growth both this year and next. While this is welcome news, Scotland’s employment is predicted to lag the UK average.
"Differences between Scotland and UK’s employment growth prospects, in part, relates to underrepresentation in certain sectors that are expected to see stronger employment growth in the future.
"Our report predicts demographics will continue to play a key role in determining the scale of future jobs growth which shows why a competitive advantage is so important in attracting a highly skilled workforce.
"That’s why having a shared vision, like the Scottish financial services growth strategy, is fundamental to constructive collaboration across industry and government, and the sector looks forward to deepening that dialogue with the incoming new government."