Norway: Economic output contracts at slower pace in April
June 5, 2020
Economic output contracted 4.0% over the prior month in April in seasonally-adjusted terms, softening slightly from the 5.7% contraction in March. As such, the economy shrank 4.6% in the rolling quarter of February–April relative to the previous quarter, which was markedly sharper than the 1.6% contraction in January–March.
Mainland GDP—which excludes hydrocarbon extraction and related transport—fell 4.7% in April over the previous month, after slumping 6.9% in March. In the rolling quarter of February–April, the mainland economy shrank 5.7% from the previous rolling quarter, markedly worse than the 2.1% contraction recorded in January–March.
In April, a milder fall in domestic demand drove the softer overall contraction. Private consumption fell 6.7% month-on-month (mom) after plunging 13.7% in March, while fixed investment fell a more moderate 0.3% in April after falling 1.7% in the prior month. Externally, exports slumped 6.0% in April, worsening from March’s 1.5% fall, while imports also declined, albeit at a softer pace (April: -8.2% mom; March: -11.8% mom).
Statistics Norway also published updated forecasts for the full year on 5 June, noting that although the economy is in a deep economic crisis, activity appears to be picking up as containment measures are eased. As such, it now expects GDP to fall 2.9% this year, an improvement from the 4.0% contraction projected in the April forecast, indicating a faster-than-expected rebound in activity amid a falling infection rate and bolstered government spending.
The rebound will likely be hamstrung by prolonged weakness in key trading partners, as both demand and activity take time to recover from widespread lockdown measures. Moreover, relatively low oil and gas prices are expected to weigh on investment in the energy industry this year, while increased volatility in global markets is a key risk to the sector. Nevertheless, substantial increases in government spending, combined with the Norges Bank cutting rates to 0.0% in early May, should bolster the recovery.
Author: Stephen Vogado, Economist