Norway: Economy rebounds in fourth quarter
February 9, 2017
In Q4 2016, Norway’s total economy expanded 1.1% in seasonally adjusted terms from Q3, contrasting the 0.6% contraction recorded in the previous quarter. Mainland GDP, which excludes oil and gas extraction and related services and transport, edged up from a 0.1% rise in Q3 to a 0.3% expansion in Q4. Norway has been battered by the global decrease in petroleum prices and its important oil industry has seen investment plunge in the last two years and unemployment surge due to large-scale layoffs. The Q4 results show timid signs of the economy being back on an upward trajectory, as both the oil and gas sector and the mainland economy fared better. In year-on-year terms, total GDP increased 1.8% in Q4 (Q3: -0.9% year-on-year) and Mainland GDP rose 1.0% (Q3: +0.7% yoy).
Q4’s growth was supported by a rebound in domestic demand, with an upswing in private consumption being particularly encouraging. Private consumption increased 0.7% over the previous quarter in Q4, the best result in two years, after having stagnated in Q3. Household spending was supported by the gradual decline in the unemployment rate from its decade-high in July and improved consumer sentiment. Fixed investment grew 0.6%, down from a revised 1.2% in Q3 (previously reported: +2.6% s.a. quarter-on-quarter). The downturn was caused by a sharp drop in government investment, but oil sector related investment was a bright spot in the data, growing for the first time in over three years. And petroleum-related activity is expected to recover going forward as global oil prices are climbing up. Total investment jumped from a 3.6% contraction in Q3 to a 3.0% rise in Q4, due to a buildup in inventories. Meanwhile, government spending was stable at Q3’s 0.5% increase.
The external sector’s contribution to overall growth was disappointing in Q4. Exports dropped 1.3%, contrasting the revised 0.4% increase observed in Q3 (previously reported: +1.1% s.a. qoq) Exports of traditional goods, which exclude crude oil, natural gas, natural gas condensates, ships and oil platforms, recorded another decline in Q4. Exports of refined products recorded an especially-pronounced fall. Imports decreased 1.5%, a sharper drop than the revised 0.5% decline in Q3 (previously reported +1.3% qoq s.a.). As a result, the external sector’s contribution to growth worsened from plus 0.3 percentage points to minus 0.1 percentage points.
For 2016 as a whole, Norway’s total GDP grew 1.0%, down from 2015’s 1.6% increase and mainland GDP expanded 0.8% also decelerating from 2015, when it grew 1.1%.
The Q4 results are encouraging and the Norwegian economy is set to pick up steam after a sluggish year. Higher prices for crude oil and refined products bode well for exports, which are seen rebounding this year and supporting an acceleration in total GDP. The uptick in the petroleum sector is seen spilling over to mainland activity with fixed investment and private consumption gaining traction.