Scotland's enterprise minister has said the country's economy is in good shape despite latest figures showing a fall in manufacturing and foreign investment.

Gross Domestic Product (GDP) fell by 0.7% in the first quarter of this year, while the value of Scotland's inward investment projects fell from �1.7bn to �271m.

Iain Gray said that while the figures were disappointing, companies from abroad still viewed Scotland as an attractive base for business and investment.

But opposition parties claimed that the Scottish economy was in freefall and in the throes of recession.

Iain Gray remains upbeat about the economy

Scotland's share of inward investment during the financial year 2001-02.

The number of jobs created reached 6,386 - down from 14,346 in 2000-01.

Scottish Executive estimates suggest that while GDP in Scotland fell, it rose by 0.2% for the rest of the UK.

Scotland's share of the UK's inward investment remained at 9% over the past 12 months.

Though the figures could not be discounted, Mr Gray said that investors remained attracted to Scotland.

'Willing to invest'

"Although it would be easy to dismiss today's figures as disappointing, it is important to realise that the projects that have been won for Scotland were won against an incredibly difficult global backdrop," the minister said.

"It is encouraging that although our actual numbers have dropped - in common with the rest of the UK and many of our competitors - our share of the UK total inward investment has remained reasonably constant."

Mr Gray added: "This shows that companies who are still willing to invest are willing to do so in Scotland.

"The figures show that 20% of inward investment projects coming to Scotland have a research and development focus - double the figure in the rest of the UK and Europe."

However, the Scottish National Party and the Scottish Conservatives joined forces to challenge Mr Gray's optimism.

Annabel Goldie: Economy crushed

Tory enterprise spokeswoman, Annabel Goldie, said: "The Conservatives have warned the Government for years that its increases in tax, red tape and regulation would undermine the economy, inhibit growth and cost jobs.

"Labour's failure to pay attention to our warnings has crushed the Scottish economy, which is now officially in recession."

SNP MSP, Andrew Wilson, said the minister had been "complacent" and his colleagues had "buried their heads in the sand".

"We are now in recession, manufacturing is in freefall and we have just had a record rise in unemployment."