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Sunday, June 16, 2024

Economists hail restrictions now

Several Norwegian economists have come out strongly in favour of the stricter Corona containment measures now in effect nationwide, no matter how painful they are for many businesses and industries. They think it’s better to take economic losses now, instead of even bigger losses and more bankruptcies later.

Empty restaurants are now common around Oslo again, after strict new anti-infection measures are urging people to stay home. PHOTO: Nordic Choice Hotels

“The authorities shouldn’t have caved in as much as they did (when restrictions were eased heading into last summer),” Ragnar Torvik, a professor of economics at NTNU in Trondheim, told newspaper Dagens Næringsliv (DN). “They should have rather tightened the rules earlier. Then we’d perhaps have lower infection rates now.”

Norway continues to have one of the lowest infection rates in Europe, which is currently considered the epicenter of the Corona pandemic. There’s no question, however, that infection has skyrocketed since the summer holidays and especially in the past two weeks. Oslo and Bergen are in various degrees of shutdown at present, and social gatherings are severely limited all over the country. Prime Minister Erna Solberg continues to urge all Norwegians to just “stay home.”

“Folks are cancelling julebord (pre-Christmas parties) and staying home” in Trondheim, too, Torvik said. “I think many people think that it’s better to take the hit here and now, with a view to things improving later. The earlier we bring the infection numbers down, the less it will harm the economy.”

Lowering costs to the economy
Harald Magnus Andreassen, chief economist at Sparebank1 Markets, agrees. He thinks the economic cost will be lower with restrictions in place now.

“The economy is getting hit regardless, but if the restrictions come before infection outbreaks get too big, the economic and health costs will be less than if we’d waited with infection control measures,” Andreassen told DN. “That’s why I think the authorities are doing the right thing. It’s better to take economic losses now, than taking bigger economic losses four to six weeks from now, when many more people will also be sick, more in the hospital and more dead.”

Torvik especially supports new demands for negative Corona tests from foreign workers arriving from countries with high infection rates, along with stricter quarantine demands. It’s also important for everyone to simply change their behaviour and accept that restrictions are necessary in order to fend off even worse effects of Covid-19.

No one can belly up to any bars in Oslo right now, either, because of a ban on serving alcohol that’s part of Corona containment measures. Most have simply closed. PHOTO: Nordic Choice Hotels

Professor Steinar Holden at the University of Oslo led the government commission that has studied the effects of the Corona crisis in Norway. He also contends that “the longer you wait (with imposing anti-infection measures), the harder shutdowns will be.” He now wishes Oslo had cracked down earlier with measures that have now closed bars, restaurants and other venues where the public gathers.

“I can understand that (city government leader) Raymond Johansen wanted to wait and see” what would happen with infection rates, Holden allowed, however. “It is demanding to shut down and the measures are opposed by some critics.”

Also by some of those most affected, with restaurant and bar owners in Oslo now wondering whether they’ll be able to reopen or simply go out of business. Many are eligible for government aid, however, and Holden points to studies in other countries that show how more comprehensive and early infection control measures have resulted in both lower death rates and less downturns in the economy.

Andreassen thinks the worst economic consequences of the Corona crisis “are behind us,” and that future losses will be a fraction of what they were in March and April when gross national product sank 11 percent. “Schools and day care centers are staying open and many people are working, if from home,” he noted. “Unfortunately the travel industry and restaurants are hit hard, but those businesses would have been even more seriously hit if we’d let infection rates climb to a high level and we had to go into a full lockdown.”

Bankruptcy wave hasn’t hit, yet
Some economists are surprised that Norway’s bankruptcy rate has stayed as low as it has. Not even the travel industry has seen a big wave of bankruptcies yet, despite hotel vacancy rates of as much as 80 percent, restaurants closed and airlines mostly grounded. Many businesses are being kept afloat by the government’s crisis aid packages, which opposition politicians in Parliament want to sweeten even further.

Per Einar Ruud, an economist at the credit rating and analysis firm Bisnode, noted that there was actually a decline in bankruptcies from September to October and for the first 10 months of the year. “I must admit that I’m very surprised,” Ruud told DN. He’s been predicting a wave of bankruptcies since early last spring but it hasn’t materialized.

It may still come, with economics professor Ola H Grytten at business school NHH in Bergen predicting that “this is just a postponement of the wave that will probably come. We don’t know how big it will be, as the government bails out companies through compensation packages. There’s no certainty it will be as big as so many expected. Everything depends on when the crisis will ease.”

Unemployment, meanwhile, remains relatively high in Norway, with 25 percent of those working in the travel business expected to be without work heading into the holiday season. Another 15,000 may be laid off in December, like more were at the new Amerkalinjen Hotel that’s enjoyed rave reviews and international acclaim. It had to lay off another 40 workers this week. Around 90 would normally be working at the hotel, but that had dwindled to around 10-15 by Friday.

“We are way down to minimum staff,” hotel director Wilhelm Hartwig told Aftenposten. He hopes Oslo residents will at least pop in for pre-Christmas lunches, even if they can’t have a glass of beer or wine because of Oslo’s ban on serving alcohol. “And we hope we’ll also get more hotel guests in the time ahead.” Berglund



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