Norway: Total GDP growth hits three-year high in Q4 2019, propelled by oil and gas exports
February 7, 2020
The total economy grew 1.6% in the fourth quarter of 2019 in quarter-on-quarter seasonally-adjusted terms, after flatlining in Q3—marking the fastest acceleration since Q4 2016. The mainland economy—which excludes petroleum activities and related ocean transport—increased 0.2% in Q4, down from the third quarter’s 0.6% expansion. In annual terms, the economy expanded 1.8% in Q4, up from the third quarter’s 1.2% increase; the mainland economy also grew 1.8% in Q4, but was down from the third quarter’s 3.6% expansion.
In quarter-on-quarter seasonally-adjusted terms, exports surged 6.0% in the fourth quarter, marking the strongest expansion since September 2001. This was largely thanks to crude oil and natural gas exports soaring 16.2% in quarter-on-quarter seasonally-adjusted terms, after the Johan Sverdrup offshore oil platform came online in October. On the other hand, imports contracted 0.8% in Q4, down from the third quarter’s 0.3% expansion, weighed on by weaker domestic demand activity. As a result, the external sector added 2.4 percentage points to economic growth in Q4, after subtracting 0.6 percentage points in Q3.
On the domestic front, demand contracted slightly, likely the result of Norges Bank’s previous rate hikes, which sought to cool the economy as it was seemingly running above potential. Private consumption growth flatlined in Q4, down from the 0.5% expansion in Q3, while government consumption also lost some steam (Q4: +0.5% qoqsa; Q3; +0.6% qoqsa). For its part, fixed capital formation growth slumped to 0.9% from 3.2% in Q3.
Looking to 2020, economic growth should gain solid momentum as strong wage growth and a tighter labor market support household spending. Meanwhile, increased oil and gas extraction from the Johan Sverdrup offshore oil platform should continue to propel industrial production and energy exports. Nevertheless, depressed oil prices, a subdued global growth outlook and the Norges Bank's relatively hawkish stance will likely cap this year's acceleration.
Author: Steven Burke, Economist