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Saturday, June 15, 2024

Economic growth grinds to a halt

Norway’s booming, oil-fed economy of the past several years is showing clear signs of a slowdown, with some economists predicting that growth is “close to stopping up entirely.” No crisis is looming, they say, but unemployment levels are rising and growth is already slower than it’s been for the past 10 years.

Workers go on board one of Statoil's drilling rigs in the North Sea. One recruiter said only the big companies like Statoil are able to help workers get through immigration processes and settle in Norway. PHOTO: Statoil/Øyvind Hagen
Norwegian oil company Statoil is still busy drilling for more oil and gas wealth offshore, but the country’s oil-fed economy is nonetheless showing signs of a slowdown. PHOTO: Statoil/Øyvind Hagen

“We’re witnessing some powerful brakes being put on the Norwegian economy,” Dag Aarnes, a director at the Norwegian employers’ association NHO (Næringslivets Hovedorganisasjon), told newspaper Dagens Næringsliv (DN) on Wednesday. NHO’s latest quarterly report on the business plans of its roughly 2,600 member companies show a clear downturn in their economic outlooks.

The market indices collected by NHO also show a sharp decline in the number of companies that look positively on the next six to 12 months. “So it looks like  the downturn can last for awhile,” Aarnes said.

More people out of work
Norway is still enjoying relatively low unemployment rates, of around 3.5 percent, compared to the alarmingly high levels in other European countries hit by the euro and debt crises. Since Europe remains Norway’s biggest market for exports of everything from energy to seafood, though, the severe economic problems among many EU members were bound to have an effect on Norway sooner or later. Prime Minister Jens Stoltenberg and his finance minister, Sigbjørn Johnsen, has warned of that for the past few years.

Now it’s setting in, with the numbers of unemployed in Norway rising to around 100,000 and expected to hit 120,000, according to NHO. Economists at major Nordic bank Nordea are also turning more pessimistic, and have downgraded Nordea’s prognosis for the Norwegian economy.

“We expect lower growth in the areas that have been the strongest, namely investment in oil and real estate,” senior Nordea analyst Katrine Godding Boye told DN. “We also see weaker growth in consumption.” Moderate pay increases this year, she said, will reduce household purchasing power.

Mainland industry in Norway, encompassing that not involved in the offshore oil and gas industry, has been hit by weaker markets abroad and the strong Norwegian currency, which can make their export products less competitive. While NHO thinks mainland growth will climb again next year after the current decline this year, Nordea predicts growth in 2014 to be weaker than this year, at a relatively modest 2.2 percent.

Neither NHO nor Nordea foresees any crisis, however, with economic prospects merely reduced from “very good times” to “normal development.”

Views and News from Norway/Nina Berglund

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