GDP Growth and inflation (Y/Y, %)After slowing in 2019, Norwegian GDP growth should swing into negative territory in 2020 due to the spread of the coronavirus epidemic and its impact on the economy and on world demand for oil.
Moribund exports and the first confinement measures
Exports of goods and services in the energy sector account for nearly 20% of Norway’s GDP. Consequently, the drop-off in world oil demand should have a major impact on the economy, which the government has admitted will enter recession in 2020.
Economic stimulus measuresIn addition to the decline in exports, which will be accentuated by the restrictions on cross-border movements of goods and persons, public and private investment both will be hit hard by low crude oil prices. The price per barrel of Brent crude oil fell to USD 20 at the end of March, which erodes the profitability of investment projects. After the major infrastructure expenditures of 2019, spending plans for 2020 have been frozen (notably for roadway and motorway infrastructure).
Although Norway has been relatively sheltered from the coronavirus epidemic (16 deaths reported at 31 March), the number of new cases has increased rapidly. As a result, the government introduced travel restrictions and social distancing recommendations. Schools and universities were closed on 12 March, and then non-residents were banned from entering the country on 16 March. Discretionary travel that is not work related is highly discouraged. To offset the ensuing loss of revenues, notably in the tourism, retail and transport sectors, the government has rolled out major fiscal efforts via guaranteed loans and deferred payments (see box).
