Norway’s currency remains historically weak, the housing market has cooled off, concerns are rising about the future of the oil industry and investments are due to slow down. Norway’s state statistics bureau SSB (Statistics Norway) now thinks those trends will continue through next year, meaning that the country’s long-running economic upturn is about to end.
“During the course of next year, the (most recent) economic upturn in Norway that began in early 2017 will probably be over,” SSB writes in its latest economic outlook published this week. That may not be as ominous as it sounds, since Norway’s economy remains strong, but growth is likely to be much more moderate than it’s been in the past.
Newspaper Dagens Næringsliv (DN) reported Friday that SSB specifically expects oil investments, for example, to rise just 2 percent next year and then decline by 7.6 percent in 2021 before rebounding a bit with growth of 3.1 percent the year after that. Oil investment has been enormously important over the past 50 years, since oil was first found in the North Sea around Christmas of 1969. It has fueled Norway’s economy ever since and investment growth was still strong this past year, but mostly because of more development of the Johan Sverdrup and Johan Castberg fields. That will taper off in 2021.
‘Change of pace’
While oil investment is due to rise again in 2022, it will be “moderate” while climate concerns continue to raise investment uncertainty in the years ahead. A United Nations adviser has called on Norway to stop issuing licenses for more exploration and production in the Arctic, while several political parties are now talking about halting all new exploration in order to meet Norway’s emission reduction goals. That can further bolster SSB’s prediction of a “change of pace” in petroleum industry investment.
SSB, meanwhile, thinks interest rates will remain low in line with a “slow decline” in the global economy. That in turn will likely keep Norway’s krone weak as well. That’s good for export industries but otherwise not a sign of a particularly vigorous economy.
Interest rates ‘abnormally low’
“In the years ahead, we expect that growth in the Norwegian economy will lie near trend growth, unemployment will be in line with what we view as normal … and the housing market will be in balance,” SSB wrote. The days of double-digit increases in housing prices already seem to be over, given recent reports from the national real estate brokers’ association.
SSB called interest rates “abnormally low,” but that may become the new normal. Inflation will likely remain around goals set by Norway’s central bank, currently 2.5 percent, while pay growth is expected to remain at around 3.5 percent.
That suggests Norwegians will have more purchasing power, while no longer seeing their fortunes rise on the value of their real estate.
For more details on SSB’s report, click here (external link to the statistics bureau’s own website).