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Norway GDP Q3 2023

Norway: Economy enters technical recession in Q3

The Norwegian economy entered a technical recession in the third quarter of 2023; GDP declined 0.5% in seasonally adjusted quarter-on-quarter terms, mirroring the fall tallied in the second quarter. More positively, the mainland economy—which excludes petroleum activities and related ocean transport—expanded 0.1%, improving from the prior quarter’s flat reading but coming in below both the market’s and Norges Bank’s expectations.

The total economy’s downturn chiefly reflected a deterioration in fixed investment and exports of goods and services. Domestically, fixed investment posted the sharpest contraction since Q2 2021, declining 2.1% in Q3 (Q2: +0.7% s.a. qoq). This outweighed another 0.9% government spending expansion in Q3, and stronger consumer consumption growth of 0.5% in the quarter (Q2: +0.4% s.a. qoq).

Turning to the external sector, exports of goods and services swung into a contraction and fell 0.8% in the third quarter, deteriorating from the prior three months’ 0.4% growth. Similarly, imports of goods and services also deteriorated (Q3: -2.5% s.a. qoq; Q2: +2.2% s.a. qoq).

Meanwhile, on an annual basis, total economic activity contracted 1.9% (Q2: +0.3% yoy), marking the worst reading since the onset of the Covid-19 pandemic in Q1 2020. Similarly, mainland economic activity also declined by 0.3% in Q3 (Q2: +0.2% yoy).

The mainland economy’s upturn in the third quarter, coupled with an increase in core inflation in October, seemingly cements the likelihood of another interest rate hike from Norges Bank when it convenes next on 14 December. Higher interest rates, coupled with falling house prices, could spell trouble for households’ wealth and, therefore, consumption. However, price pressures have gradually cooled on average recently and nominal wages have grown healthily, supporting a recovery in purchasing power.

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