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Norway GDP Q2 2021

Norway: Economy rebounds in the second quarter

The economy bounced back in the second quarter, with GDP increasing 1.1% on a seasonally-adjusted quarter-on-quarter basis and contrasting the 0.6% contraction seen in the first quarter.

The second quarter’s upturn was bolstered by the lifting of domestic Covid-19 restrictions as the vaccination drive picked up pace. Private consumption rebounded, increasing 3.4% in seasonally-adjusted quarter-on-quarter terms following the 3.6% contraction logged in Q1, boosted by higher employment levels in the quarter. Government spending also returned to growth, clocking in at 1.9% in Q2 (Q1: -1.5% s.a. qoq), while fixed investment rebounded, growing 2.8% and contrasting the 2.9% decrease recorded in the previous quarter.

On the external front, exports of goods and services bounced back in Q2, growing 3.9% in seasonally-adjusted quarter-on-quarter terms, which marked the best reading since Q4 2020 (Q1: -1.8% s.a. qoq). In addition, imports of goods and services rebounded, growing 3.9% (Q1: -4.9% s.a. qoq). Consequently, the external sector contributed 0.3 percentage points to the overall reading in Q2, down from Q1’s 0.7 percentage-point contribution.

The mainland economy—which excludes petroleum activities and related ocean transport—expanded 1.4% on a seasonally-adjusted quarterly basis in Q2, contrasting the 1.0% contraction recorded in Q1. Meanwhile, on an annual basis, total economic activity returned to growth in the second quarter, rising 6.1% and contrasting the previous period’s 1.4% decline. Q2’s reading marked the fastest increase since Q1 2000. Lastly, the mainland economy expanded 7.8% year-on-year in the quarter (Q1: -1.4% yoy).

Looking ahead, momentum likely carried on at the outset of the third quarter. That said, growth will likely slow down as the favorable base effect eases and the monetary policy stance is tightened ahead. Meanwhile, risks to the outlook remain, as the continued spread of the Delta variant could prompt the reimposition of some restrictions, while prolonged high price pressures could dent spending. Moreover, a potential change in power at the upcoming general elections on 13 September could lead to a redirection of policies.

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