The Corona crisis of the past year may at the very least serve as somewhat of an equalizing factor worldwide. For Norway, it’s meant a sharp economic decline after years of oil-fueled growth that may leave it with many of the same challenges faced by most all other countries.
Norway’s state statistics bureau SSB (Statistics Norway) released a report on Friday showing a 2.5 percent decline in the mainland economy (excluding the country’s offshore oil, shipping and pipeline trade) in 2020. “It’s the biggest economic crisis in peacetime,” claimed Finance Minister Jan Tore Sanner.
SSB’s report entitled Norges Nasjonalregnskap (National Accounts) shows mainland GDP growing 1.9 percent in the fourth quarter, however, and activity levels up 1 percent in December. That’s actually better than expected compared to other countries, with SSB’s economists appearing more positive than Sanner.
“Preliminary accounts show that the downturn in 2020 was somewhat lower than we feared when (Corona virus-related) restrictions were at their peak in March and April last year,” stated Pål Sletten, head of the National Accounts division at SSB. There were “large movements” in the economy throughout the year, according to SSB, and “large differences in separate industries.” Oil and gas “experienced good growth,” while service industries were hit hard.
(See SSB’s own report here – external link to SSB’s website.)
It all makes Sanner and Prime Minister Erna Solberg nervous, however, with Sanner claiming the Corona crisis “has made us all poorer.” Others might say “less rich,” given the country’s huge oil revenues that allowed Norway to build up the world’s largest sovereign wealth fund known as the Oil Fund. It kept on earning lots more money during the crisis, even as Sanner, Solberg and their government colleagues kept dipping into it to finance Corona compensation and emergency aid packages to closed businesses and laid-off workers.
Sanner claims SSB’s report underscores the “serious situation” that the Norwegian economy is now in. He said last year’s economic downturn leaves him worried about the high unemployment levels that have resulted and the risk that many more people will be left outside the workforce.
The biggest losers during the Corona crisis have been the travel industry, the transport sector, entertainment and cultural ventures and large portions of the service industry, not least restaurants and bars that have mostly had to close.
It means, Sanner said in the government’s own report on economic prospects over the next several decades, that Norwegian youth will need “to learn more and work more” in order to attain the same degree of affluence as their parents’ generation. Norway will also need far more skilled labourers and more people working for every person who’s retired.
“While there are four people of working age behind every person of retirement age now, there will only be two in 2060,” Sanner stated in the government’s report called Perspektivmeldingen 2021. It outlines the challenges ahead and the government’s strategies to address them.
Sanner and Solberg have warned for years, as have governments before them, that Norway’s aging population, migration, low birth rate, more people on disability and less oil revenues will cause problems. Some of those problems are already cropping up.
“If we don’t do anything, we will lack NOK 5 billion every year,” Solberg said. She and Sanner favour value creation over simply raising taxes. Since Norway’s oil industry is likely to generate 65 percent less oil and gas in 2060 than now, lots of oil and gas workers “need to find something else to do.” It’s important that new sorts of jobs are created for young people.
“The government’s most important strategy is get more people in the work force,” Solberg said. “We need to create more jobs in the private sector and we must make sure that more people have the opportunity to take part. Strong, diverse and green businesses are important so that people will have a job to go to, and so that we can continue to have a good standard of living.”
She claimed her government will keep working to create growth in the private sector, increase employment and contribute to good use of resources in the public sector.” She called for more investment in education, integration, inclusion, innovation and efficiency in order to maintain the welfare state and a “more economically sustainable” society.
Sanner, while issuing lots of warnings, concluded on a more upbeat note himself, noting that Norway “has one of the world’s best starting points” to handle the challenges ahead. “We have a high degree of mutual confidence in society, we have come a long way in the digital process and we have relative high employment, low unemployment and a well-functioning workforce,” he said. “We also have businesses that are good at restructuring and solid state finances.”
Norway’s economy is expected, meanwhile, to recover quickly when Corona restrictions can finally end. There’s lots of pent-up demand and motivation for laid-off workers to get back to work. Economic restructuring will continue, however, away from oil and gas and into new fields, many still to be discovered.