Norway: Strong mainland economy supports growth in Q4
February 8, 2019
The economy grew a seasonally-adjusted 0.5% in the fourth quarter, down from 0.6% in the third quarter and hampered by the large fall in oil prices observed in the period. The mainland economy—which excludes petroleum activities and related ocean transport—expanded 0.9% in Q4, which was above market analysts’ expectations of 0.8% growth and up from the revised 0.4% increase in Q3 (previously reported: +0.6% quarter-on-quarter). The economy grew 1.7% year-on-year in Q4, up from Q3’s 1.2% increase.
In quarter-on-quarter terms, private consumption rose a seasonally-adjusted 0.4% in Q4, supported by stronger consumption of services and rebounding from Q3’s 0.1% contraction. Government consumption edged up 0.1%, matching Q3’s figure, while fixed investment declined 0.8% qoq, contrasting the third quarter’s 1.4% expansion. The fall in fixed investment was attributable to lower investment in the mainland economy, as investment in the oil sector surged.
Exports fell 1.9% in Q4 from the previous quarter in seasonally-adjusted terms (Q3: +0.7% qoq) on lower exports of services and hydrocarbons. Imports, meanwhile, were down 1.0% (Q3: -0.4% qoq). As a result, the external sector subtracted 0.3 percentage points from growth in the fourth quarter, contrasting the positive 0.4 percentage-point contribution in Q3.
Economic prospects for this year are fairly bright, with the economy set to benefit from healthy investment in the oil sector. Moreover, a tight labor market and a likely fall in inflation should boost real wages and private consumption.
Norway GDP Forecast
The Central Bank expects total GDP to increase 2.0% in 2019 and 1.8% in 2020. FocusEconomics Consensus Forecast panelists see total GDP expanding 2.1% in 2019, which is unchanged from last month’s forecast. For 2020, our panelists expect growth of 1.9%. In terms of mainland GDP, the Central Bank predicts growth of 2.3% in 2019 and 1.6% in 2020. FocusEconomics Consensus Forecast panelists see mainland GDP increasing 2.2% in 2019, which is down 0.1 percentage points from last month’s projection, and 1.9% in 2020.
Author: Edward Gardner, Economist