Why a recession in Norway might not be as bad as expected
There may be a recession in Norway this year, but if a recession occurs, it will happen after a significant period of growth in Norway and will not be dramatic, the chief economist from Norway's largest bank believes.
On New Year's Day, the International Monetary Fund (IMF) warned against recession in half of the EU and a third of the global economy.
DNB, Norway's largest bank, has not forecast a recession in Norway this year, but it could happen, its chief economist Kjersti Haugland stated.
"Norway is influenced by the outside world. When it's bad out there, it's bad in Norway too. It would not be surprising if there were a recession in Norway," she told the news bureau NTB.
"But it would be after a period of low unemployment and high economic activity. That means that the situation would be less dramatic than if we had initially been in a situation with higher unemployment and bad times," she said.
The effect of multiple crises
According to Haugland, the war in Ukraine, sanctions against Russia, and the aftermath of the coronavirus pandemic have all contributed to a growing consensus that a global economic slowdown is inevitable.
The IMF pointed out that the said slowdown in the US, the EU and China - at the same time - means that 2023 will be a more difficult economic year than 2022.
"These problems have created high inflation, which has caused the central banks to raise interest rates very quickly and markedly. That weakens purchasing power. It is a difficult situation, especially for households," Haugland explained.
She said that it is almost surprising that the economies are not hit harder than they are.
"Things look less dramatic right now than they did just six months ago... Yes, there will probably be a slowdown in the economy, but perhaps not very dramatically," she noted, highlighting that financial policies and support schemes have helped that things are not worse.
Lower inflation?
Haugland said that price growth would slow down significantly in the year ahead.
This does not mean that prices will immediately be lower.
"There is a danger that price inflation will come down, but stabilize at a higher level than is desirable. The central banks are afraid that price inflation will not stabilize at 2 per cent, but perhaps at 3 or 4 per cent if they do not act," Haugland explained, according to NTB.
Furthermore, financial support schemes contribute to price pressure persisting for longer periods of time.
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On New Year's Day, the International Monetary Fund (IMF) warned against recession in half of the EU and a third of the global economy.
DNB, Norway's largest bank, has not forecast a recession in Norway this year, but it could happen, its chief economist Kjersti Haugland stated.
"Norway is influenced by the outside world. When it's bad out there, it's bad in Norway too. It would not be surprising if there were a recession in Norway," she told the news bureau NTB.
"But it would be after a period of low unemployment and high economic activity. That means that the situation would be less dramatic than if we had initially been in a situation with higher unemployment and bad times," she said.
The effect of multiple crises
According to Haugland, the war in Ukraine, sanctions against Russia, and the aftermath of the coronavirus pandemic have all contributed to a growing consensus that a global economic slowdown is inevitable.
The IMF pointed out that the said slowdown in the US, the EU and China - at the same time - means that 2023 will be a more difficult economic year than 2022.
"These problems have created high inflation, which has caused the central banks to raise interest rates very quickly and markedly. That weakens purchasing power. It is a difficult situation, especially for households," Haugland explained.
She said that it is almost surprising that the economies are not hit harder than they are.
"Things look less dramatic right now than they did just six months ago... Yes, there will probably be a slowdown in the economy, but perhaps not very dramatically," she noted, highlighting that financial policies and support schemes have helped that things are not worse.
Lower inflation?
Haugland said that price growth would slow down significantly in the year ahead.
This does not mean that prices will immediately be lower.
"There is a danger that price inflation will come down, but stabilize at a higher level than is desirable. The central banks are afraid that price inflation will not stabilize at 2 per cent, but perhaps at 3 or 4 per cent if they do not act," Haugland explained, according to NTB.
Furthermore, financial support schemes contribute to price pressure persisting for longer periods of time.
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