Tourism should enjoy better prospects

The analysts said the economy will benefit from an upsurge in overseas tourists following a sharp downturn after the 11 September terror attacks on the US.

There should also be a rise in UK visitors choosing to holiday in Scotland.

The report revealed that economically the Borders is expected to lead the way ahead.

Overall growth in that area is expected to reach 2.7% next year, followed by Glasgow, Lothian and Renfrewshire - each with 2.5%.

Fife is next with 2.3% growth, ahead of Grampian, Lanarkshire and Dumfries and Galloway with 2.2%.

Clare Reid, Business Strategies' associate director, said: "After a tough year for Scottish business, the indicators are that the worst is probably over.

'Public spending'

"Scottish manufacturers, especially those in the hi-tech sectors, were particularly badly hit by last year's downturn.

"Although they will see the benefits of stronger world demand, it is likely to be the second half of this year before this fully impacts on their business."

Ms Reid warned that jobs were likely to be cut because of this.

She said: "The weaker growth will be offset by a rise in public spending and investment and further growth in private services.

"However, growth in private services will be slower, thanks to more moderate spending by Scottish households."

Speaking about the prospects for tourism, Ms Reid said: "After two years of little growth, this year will be better, as overseas visitors are gradually attracted back and as more UK travellers choose to stay at home."