Norwegian mainland GDP falls in Q1 2020; decline likely to be bigger in Q2

Norway’s mainland GDP fell 6.4 percent in March. For the whole of first quarter of 2020, the GDP declined 1.9 percent. This is the sharpest fall since the financial crisis in the fourth quarter of 2008. The fall is expected to be bigger in the second quarter, said Nordea Bank in a research report.

In the second half of March 2020, the Norwegian economy came to a halt due to the government’s lockdown measures to slow the spread of the coronavirus. While these measures have been successful in containing the virus they have also had a severe negative impact on the economy. The reduction in production and demand was widespread.

Private consumption of goods and services dropped in the first quarter by 2 percent and 4 percent, respectively. Public consumption is estimated to have remained the same. There is limited information available for investments; however, gross fixed capital formation is likely to have dropped 6 percent in the first quarter, said Nordea Bank. Exports of traditional goods dropped 3.5 percent in the March quarter, while imports came in lower as well.

According to Statistics Norway, the fall in mainland GDP was unevenly distributed among industries and especially solid for industries where infection control measures led to end of activity. Services industries were greatly impacted; however, the preliminary figures also indicate a fall in manufacturing of 1.4 percent in the first quarter.

“This year mainland GDP could decline in the range between -3 percent and -10 percent. The longer term outlook of the economy depends largely on when the restrictions are lifted; not just in Norway but also in the rest of the world. The drop in Q2 will be bigger than in Q1. But this is already old news. What matters is how fast the economy reopens and how we adapt to the virus going forward. Uncertainty is unusually rife”, added Nordea Bank.