Norwegian economy: first contraction in two decades

Norwegian economy: first contraction in two decades

02-19-2010 09:35

The Norwegian economy shrank last year, for the first time in two decades. The whole array of GDP components, with the exception of government spending, declined in comparison to 2008. The mainland-Norway gross domestic product contracted 1.5% last year, while it grew 2.2% in 2008, according to the Norwegian statistics bureau. The contraction in the mainland began from July through September 2008 and lasted until the initial quarter of last year.

Economic expansion

Norway’s economy found its path out of recession in the second quarter of last year as it expanded by 0.1%. The economic expansion gained pace from July through September, as the economy grew by 0.3%, while early a 0.5% growth was reported. In the last quarter of 2009, the mainland gross domestic product increased 0.3%, while a 0.8% rise was forecasted.

Gross domestic product

Capital Economics economist Ben May commented: “The pessimistic gross domestic product data of the last quarter of 2009 signaled that Norway’s economy remains considerably weak. Norway’s central bank, Norges Bank, could hamper the economic recovery if it increases interest rates too rigorous.”

Norges Bank

The Norwegian central bank was the initial central bank in Europe to increase its main interest rate as the worldwide economy demonstrated indications of improvement. Norges Bank raised the key policy rate in October 2009 and in December 2009, while it left the rate unchanged at 1.75% in February.

Norwegian economy

Norway’s economy shrank by 1.5% in 2009, including gas and oil sectors, while it grew by 1.8% in the previous year. The economic expansion weakened to 0.1% in the last quarter of 2009, in comparison to 0.5% from July through September.
Norwegian exports dropped by 4.3% last year, after a 0.9% increase in the previous year. Imports dropped 9.7% in 2009, following a 2.2% expansion. Household final consumption expenditure (HFCE) dipped 0.1%, government spending jumped 5.2%, while investment edged down 7.9%.

Mainland-Norway

Furthermore, Statistics Norway reported that the Scandinavian economy is expected to continue its recovery. However, there are no marked increases forecasted before the end of 2012. The statistical office expects mainland-Norway’s gross domestic product to increase by 2% in 2010 and by 2.7% next year. Norway will face rising unemployment in 2010 and in 2011. Norwegian inflation would be at 1.7% in 2010 and 1.3% in 2011.