NEWS ANALYSIS: Government ministers handed out more packages of Corona crisis aid this week, in an effort to avoid bankruptcies and preserve jobs. The need for all the emergency funding and financial support shows just how fragile the Norwegian economy has become.
Rising Corona infection rates lately have put a new chill on Norway’s traditionally strong economy that had been showing signs of recovery. Recent outbreaks of Covid-19 in Oslo, Bergen, Sarpsborg and other areas, however, have led to new crackdowns by local officials aimed at halting the spread of infection. They also threaten to halt economic recovery, with the Oslo Stock Exchange tumbling this week and the value of Norway’s currency weakening again.
One prominent investment manager in Oslo, Jan Petter Sissener, told newspaper Dagens Næringsliv (DN) that the stock market decline of 3.63 percent on Monday was part of a widespread change of attitudes and not any single news event. It was the biggest market decline since March, when the Corona crisis first hit Norway. “People are taking money off the table,” Sissener said. As the end of what was an otherwise good quarter looms, he noted, investors are “moving their positions to safer places.”
DN commentator Bård Bjerkholt noted that the outlook for the months ahead is what’s scaring investors more than anything. Uncertainty remains high and businesses that enjoyed a rise in revenues this summer are now fearing a much worse autumn and winter. The industries suffering the most in Norway remain travel and tourism, and they’re getting the most assistance, but many complain it won’t be enough to carry them through the winter.
“It’s wonderful that the government is coming with more fresh crisis aid,” Ivan Horneland of employers’ organization Virke said after Finance Minister Jan Tore Sanner announced another NOK 6.1 billion worth of financial assistance and Trade Minister Iselin Nybø offer another billion to the hotel and tourism industry. “We’re afraid, though, that it’s not enough.”
Hotel bookings remain way below normal. The market for conferences and large social gatherings has all but dried up. Horneland predicts Norway’s tourism businesses will see a fall in revenue of as much as NOK 90 billion (USD 10 billion) and some hotels are already closing. In Bergen, the family running the small Steens Hotel for the past 70 years is selling out, telling newspaper Aftenposten last weekend that it will simply take too much time before it will once again be profitable to run.
Airlines still mostly grounded
It’s the three airlines serving Norway the most that also are in the most trouble. Oslo-based Norwegian Air narrowly avoided bankruptcy last spring but went on to experience what its CEO Jacob Schram called a “gruesome” summer season. He and the airline’s finance director Geir Karlsen were back seeking more emergency aid from Trade Minister Nybø and Transport Minister Knut Arild Hareide this week, claiming Norwegian Air won’t survive the winter without fresh cash and captial infusions.
“We put forth our viewpoints, in which we think it’s a good idea for Norway to support Norwegian Air, and how we think it can be done,” Schram said. He didn’t want to go into detail, but Karlsen confirmed to DN that more fresh capital is needed. Many speculate that Norwegian will pressure the government into taking a stake in the troubled airline, not long after it sold off its remaining stake in SAS (Scandinavian Airlines) and has also been asked to reinvest. SAS, meanwhile, won new crisis help from its remaining investors, the governments of Sweden and Denmark and Sweden’s Wallenberg family.
The dilemma for the politicians is just how much aid they can keep handing over to troubled businesses and not least climate-unfriendly airlines, at taxpayer expense. They’ve already been dipping heavily into Norway’s Oil Fund, which is supposed to fund future pensions. Nybø herself has suggested that businesses need to adjust to new realities brought on by the Corona crisis, which may have changed markets permanently. Businesses can’t be kept on life support indefinitely.
“Supporting businesses now seems to be necessary to prevent mass collapse,” wrote Bjerkholt. Others have also claimed it can actually be a cheaper means of preserving jobs until recovery sets in. The Corona aid still being handed out, however, must have an expiration date, and shouldn’t continue to be renewed automatically.
Nybø said she’ll be meeting with SAS officials next week and management of short-haul carrier Widerøe in early October. The problem is the lack of any firm indications as to when the airlines can resume flying again, beyond the routes now being subsidized to ensure transport infrastructure.
‘Going in the wrong direction’
Once again, its the poor outlook that’s dampening what optimism is left after six months of crisis. “It’s going in the wrong direction again now,” Øystein Dørum, chief economist for employers’ organization NHO, told Aftenposten. “The improvement we saw in August has turned for the worse. That’s not entirely unexpected, since infection levels hadn’t begun to rise yet.”
Now they have, and coupled with Norway’s longstanding need to restructure its economy to become less reliant on oil, indicators are flashing red again. DN reported Wednesday on how one part-time job at a Kiwi grocery store in Oslo attracted 1,249 applications, a sign of how tough the job market has become.
The next round of aid packages is expected to be aimed at stimulating the economy, and helping companies restructure. Sanner and Prime Minister Erna Solberg identified stimulus early as making up the latter phase of their crisis assistance. Corona aid and the extent of it will also be up for debate in Parliament this fall, after it reopens in early October.