SSB: The Norwegian economy is improving, but the crisis is not over

The reopening of society is well underway, and the upswing in the Norwegian economy continues. The COVID-19 pandemic will nevertheless continue to impact the economy for a long time to come. The key policy rate is expected to increase gradually to 1.75% in 2024, according to SSB. 

Throughout the spring and summer, lower infection rates, increased vaccination rates, and the easing of national restrictions have increased economic activity. However, the Delta variant of COVID-19 has recently pushed up infection rates in Norway and abroad, but the growing vaccinated population means that far fewer of those infected are hospitalized. Continued economic growth is therefore expected.

“We assume that the reopening of society will continue going forward. In line with this, we expect economic growth to pick up considerably in 2022, particularly in many of the industries that have been hardest hit by the infection control measures,” SSB researcher Thomas von Brasch noted.

In June, mainland GDP was back at about the same level as in February 2020, i.e., before the pandemic hit Norway. Nevertheless, activity is around 2.5% lower than what Statistics Norway considers to be a trend level for the economy.

“It has to be said – that is a lot. We have to go all the way back to the crisis following the dot-com bubble in the early 2000s and the banking crisis of the 1990s to find something similar. The COVID-19 pandemic is not over yet,” Thomas von Brasch noted.

The ramifications of the international recession and national infection control measures will impact the Norwegian economy for some time to come. According to Statistics Norway’s forecasts, not until 2023 will unemployment return to what is considered a more normal level.

Greater probability of a negative development

The Delta variant is on the rise, both in Norway and abroad, and data from Israel suggest that immunity following the Pfizer vaccine will decline somewhat faster than originally thought. New mutations of the virus may also occur.

“The pandemic situation is still precarious. It is more likely to go worse than go better than forecasts show,” Thomas von Brasch added.

At the end of August, the Norwegian Directorate of Health declared that Norway is experiencing its fourth wave of infections, but hospital admissions are lower than previous waves due to the high vaccination rate. Therefore, the Norwegian Institute of Public Health considers it unlikely that intensive care capacity will be saturated in the immediate future. 

At the start of September, the government postponed stage 4 of the reopening in order to limit the spread of infection and keep the disease burden low until 90% of the adult population has been fully vaccinated. The authorities’ ambition is now to achieve this vaccination rate within 4–6 weeks.

“Our forecasts are based on this scenario. If these conditions do not come to fruition, further economic recovery will take longer than forecast in our estimates,” Thomas von Brasch accentuated.

Source: SSB / #Norway Today / #NorwayTodayFinance

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