Norway economy shrinks 2.5 percent in 2020 despite pandemic

As a result of the coronavirus pandemic, Norway's economy contracted 2.5 percent in 2020, a historic setback but a limited one compared to many other countries, official data showed Friday.

The country even saw growth in its gross domestic product (GDP) of 1.9 percent in the fourth quarter, according to Statistics Norway.

“Preliminary accounts show that the downturn in 2020 was somewhat lower than we feared when restrictions were at their peak in March and April,” Pål Sletten, head of National Accounts at Statistics Norway, said in a statement.

“This is, however, still the largest annual downturn measured for the mainland economy since estimations began in 1970, and it is probably the greatest economic downturn since the Second World War,” Sletten added.

The figures are better than those anticipated by the government and the Bank of Norway, and much better than those posted by other European countries.

On Friday, the UK reported a record 9.9 percent contraction to GDP in 2020, while the Eurozone has seen an average loss of 6.8 percent.

Statistics Norway noted that the 2020 figure was somewhat helped by the fact that the year had three more working days than 2019.

Thanks to a combination of factors, such as remote geographical location, low population density and compliance with protective measures, Norway has managed to mostly curb the spread of Covid-19 without a strict containment regime.

Norway’s central bank has cut its key interest rate to zero, and the government has drawn on the country’s huge sovereign wealth fund, the largest in the world, to support the economy.

The figures published on Friday relate to “mainland” GDP, which excludes oil production and maritime transport, an often-preferred indicator for Norway because it excludes the strong cyclical variations of oil prices.

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Norwegian economy back to pre-pandemic levels

The Norwegian economy has bounced back to pre-pandemic levels following the government’s strategy to lift Covid measures and reopen society, Statistics Norway said Friday. 

Norwegian economy back to pre-pandemic levels
The Norwegian economy has bounced back to pre-pandemic levels. Photo by pichet wong from Pexels

Norway’s economy has returned to pre-pandemic levels following a 0.7 growth in June when measured by gross domestic product (GDP), statistics Norway announced on Friday. 

“It is a milestone in the completely unusual period the Norwegian economy has been in since March 2020,” Pål Sletten, head of national accounts at the data collection firm, said in a report.

Between the first and second quarters, Norway’s mainland GDP, when excluding oil and foreign shipping, increased by 1.4 percent. 

Statistics Norway believes that this is a sign that Norway is over the worst of the economic impact that Covid-19 has had on the country. 

Some economists, such as Kjersti Haugland, chief economist at financial services group DNB, expected slightly more substantial growth overall but agreed that the progress was a milestone for the Norwegian economy.  

“It shows that recovery is in full swing in the Norwegian economy,” the economist told public broadcaster NRK.

The Norwegian Confederation of Trade Unions has also welcomed the news and hopes that coronavirus measures being eased would help more companies bounce back and get more employees back to work.

“When we have relaxed the infection control measures, we expect and hope that consumers will be in place and that the companies will pick up the laid off and get the activity going again,” Roger Bjørnstad, chief economist at LO, told NRK. 

As a result of the economic growth, it is now expected that historically low interest rates will rise as early as September. 

“The second quarter has been stronger than Norges Bank has assumed. So in this sense, current figures are something that supports Norges Bank being able to start raising interest rates in September,” Haugland said. 

Higher interest rates would signal more expensive mortgage repayments for those entering the property market in the future and for those with flexible interest rate mortgages.