Economic Survey 2021 / 3 Economic developments in Norway
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Economic Survey
2021 / 3
Economic developments in Norway
© Statistics Norway, 2021
When using this material,
Statistics Norway must be quoted as the source.Contents
Economic developments in Norway............................................................................................ 1
1. Fiscal policy with phasing out of extraordinary measures............................................................. 6
2. Towards normalisation of the interest rate level........................................................................... 7
3. Consumption on the rise again................................................................................................... 8
4. Slowing house price inflation...................................................................................................... 9
5. Petroleum investment rises to the 2019 level............................................................................ 10
6. Weak business investment – but some light ahead................................................................... 12
7. Foreign trade less affected by the pandemic............................................................................. 13
8. Normalisation of activity level anticipated................................................................................. 14
9. High employment and a high labour supply.............................................................................. 15
10. Slight decline in real wages this year......................................................................................... 17
11. Prospects of higher underlying inflation.................................................................................... 18
Boxes
Box 1. Breaks in the LFS time series................................................................................................. 17
Tables
1. Main macroeconomic aggregates. Accounts figures. Change from previous period. Per cent .... 1
2. Growth in mainland GDP and contributions from demand components. Percentage points,
annual rate ............................................................................................................................... 3
3. Main economic indicators 2020-2024. Accounts and forecasts. Percentage change from
previous year unless otherwise noted......................................................................................... 4
4. National accounts: Final expenditure and gross domestic product. At constant 2018 prices.
NOK million............................................................................................................................. 22
5. National accounts: Final expenditure and gross domestic product. At constant 2018 prices.
Percentage change from previous period................................................................................. 23
6. National accounts: Final expenditure and gross domestic product. Price indices. 2018=100..... 24
7. National accounts: Final expenditure and gross domestic product. Price indices. Percentage
change from previous period................................................................................................... 24
8. Main economic indicators 2012-2024. Accounts and forecasts. Percentage change from
previous year unless otherwise noted....................................................................................... 25
Questions about economic trends
– in Norway: Thomas von Brasch, thomas.vonbrasch@ssb.no, tel. (+47) 93 89 85 24
– international: Roger Hammersland, roger.hammersland@ssb.no, tel. (+47) 47 29 32 89
Editing was finalised on Wednesday 1 September 2021
Published 3 September 2021 Explanation of symbols Symbol
Data not available ..
© Statistics Norway Not for publication :
When using this material, Statistics Norway must be quoted as the source.
Zero 0Norwegian economy Economic Survey 3/2021
Economic developments in Norway
The reopening of society is well under way, and as a consequence of new waves of infection, both
activity in the Norwegian economy has increased in in Norway and worldwide. Through the spring and
recent months. After the first lockdown, mainland summer, low infection rates, increased vaccination
GDP fell by over 10 per cent from February to April and easing of national restrictions have prompted
last year, according to the monthly national ac- a rebound in economic activity. In June, mainland
counts. Activity picked up markedly up to October GDP had reverted to the same level as before
last year, but then declined slightly in the winter the pandemic struck in March last year. Activity is
Table 1. Main macroeconomic aggregates. Accounts figures. Change from previous period. Per cent
Seasonally adjusted
2019 2020
20:3 20:4 21:1 21:2
Demand and output
Consumption in households etc. 1.4 -6.9 9.3 0.3 -3.6 3.4
General government consumption 1.9 1.7 3.1 2.4 -1.5 1.9
Gross fixed investment 4.8 -3.8 -1.2 1.5 -2.9 2.8
Extraction and transport via pipelines 12.6 -4.1 -4.4 3.6 -3.5 4.3
Mainland Norway 4.0 -4.1 -1.1 1.1 -2.8 3.3
Final domestic demand from Mainland Norway1 2.1 -3.9 5.0 1.1 -2.8 2.9
Exports 0.5 -0.5 3.4 2.4 -1.8 3.9
Traditional goods 4.6 -2.2 8.3 3.2 1.9 0.5
Crude oil and natural gas -4.3 10.1 0.4 1.5 -6.1 8.9
Imports 4.7 -11.9 9.5 0.5 -4.9 3.9
Traditional goods 5.7 -2.6 12.8 2.1 -5.0 7.0
Gross domestic product 0.9 -0.8 4.3 0.8 -0.6 1.1
Mainland Norway 2.3 -2.5 4.9 2.0 -1.0 1.4
Labour market
Total hours worked. Mainland Norway 1.8 -2.1 3.9 0.2 -0.7 0.7
Employed persons 1.6 -1.3 -0.0 0.9 -0.4 0.4
Labour force2 1.0 0.4 0.7 0.4 .. ..
Unemployment rate. level2 3.7 4.6 5.3 5.0 .. ..
Prices and wages
Annual earings 3.5 3.1 .. .. .. ..
Consumer price index (CPI)3 2.2 1.3 0.6 0.1 1.8 0.2
CPI adjusted for tax changes and excluding energy products (CPI-ATE)3 2.2 3.0 1.0 0.1 0.5 0.1
Export prices. traditional goods 0.7 -3.4 -4.1 1.9 5.5 4.8
Import prices. traditional goods 2.5 4.2 -2.2 -0.8 1.9 2.1
Balance of payment
Current balance. bill. NOK4 102 67 17 5 94 ..
Memorandum items (unadjusted level)
Money market rate (3 month NIBOR) 1.1 0.4 0.0 0.0 0.0 0.0
Lending rate. credit loans5 0.8 0.6 2.1 2.1 2.1 2.0
Crude oil price NOK6 564 407 396 408 521 577
Importweighted krone exchange rate. 44 countries. 1995=100 107.6 114.9 113.3 114.1 109.2 107.4
NOK per euro 9.85 10.72 10.67 10.76 10.26 10.09
1
Consumption in households and non-profit organizations + general government consumption + gross fixed capital formation in Mainland Norway.
2
According to Statistics Norway›s labour force survey (LFS).
3
Percentage change from the same period the previous year.
4
Current account not adjusted for saving in pension funds.
5
Period averages.
6
Average spot price. Brent Blend.
Source: Statistics Norway and Norges Bank.
1Economic Survey 3/2021 Norwegian economy
Figure 1. GDP Mainland Norway and estimated trend Figure 2. Output gap, Mainland Norway
Seasonally adjusted, index 2018 = 100 Deviation form estimated trend GDP in percent
2 2
110 110
0 0
100 100 -2 -2
-4 -4
90 90
-6 -6
80 80
-8 -8
70 70 -10 -10
2003 2006 2009 2012 2015 2018 2021 2024 -12 -12
2016 2017 2018 2019 2020 2021 2022 2023 2024
GDP Mainland Norway Trend
Source: Statistics Norway
* Quarterly figures before 2016, monthly after. The trend is estimated by an
HP-filter (lambda = 40 000 quarterly), but such that the trend is not directly
affected by the developement of economic activity in 2020 and 2021
Source: Statistics Norway as was done in 2020 and to date in 2021. As a re-
sult of the phasing out of the extraordinary COVID
nonetheless around 2.5 per cent lower than what measures, the budget balance will be reduced to
we regard as the trend level for the economy. just under 3 per cent of the fund in 2022 already.
Economic growth is expected to continue going
forward. While the Delta variant of the COVID-19 vi- Household consumption is rising again. After a
rus has led to an increase in the numbers affected, temporary slump in Q1 this year, overall consump-
both in Norway and worldwide, a steady increase tion picked up in Q2. This rebound reflected a low-
in the share of the population that is vaccinated er rate of infection and easing of infection control
means that far fewer of those infected are hospital- measures. Growth was particularly strong in May,
ised. We assume that the re-opening of society will but continued in June. Vaccination of the popula-
continue through the autumn. In 2022, economic tion, the reopening of the economy and pent-up
activity is expected to pick up appreciably in pace household demand will boost consumption going
with the further re-opening, particularly in those forward. According to our projections, aggregate
industries that were hardest hit by the infection consumption will rise to the same level as prior
control measures. to the COVID crisis towards the end of 2021, and
grow further by close to 8 per cent in 2022. With
Many fiscal measures were implemented to coun- prospects of growth in real disposable income,
ter the economic impact of the pandemic. Calcula- but weak developments in real house prices, and
tions indicate that the measures implemented in hence also in real wealth, consumption is forecast
2020 pushed up mainland economic activity that to grow in the area of 3.5–4 per cent in 2023 and
year by 0.5 per cent.1 According to the Revised 2024. The saving ratio is expected to fall from a re-
National Budget (RNB), grants made in 2021 and cord-high 15.4 per cent last year to between 13 and
the long-term effects of last year’s measures will 14 per cent this year, gradually declining to around
boost mainland GDP by 1.4 per cent this year. The 7.5 per cent in 2024, which is approximately 0.5
structural, non-oil budget deficit for 2021 is pro- percentage point higher than the average annual
jected in the RNB to be NOK 402.6 billion. This is saving ratio for the decade 2010–2019.
equivalent to 3.7 per cent of the market value of
the Government Pension Fund Global (the oil fund) The rise in house prices has been high this past
at the beginning of the year. According to the fiscal year, indicating that the record-low mortgage rates
rule, the use of petroleum revenue over time is to and to some extent enforced saving have out-
be equivalent to 3 per cent of the value of the oil weighed other factors such as moderate income
fund, but strong emphasis is also to be placed on growth and weak population growth. Prices in Q2
smoothing fluctuations in the economy, to ensure this year were more than 12 per cent higher than
good capacity utilisation and low unemployment, prices in Q2 last year. In recent months, however,
there are signs that the rise in house prices is slow-
1
See Bjertnæs et al. (2021). COVID-19, tapt verdiskaping og ing. We therefore forecast that house prices will
finanspolitikkens rolle [COVID -19, lost value creation and the
role of fiscal policy]. Reports 2021/13, Statistics Norway.
remain at the current high level for the next few
2Norwegian economy Economic Survey 3/2021
Table 2. Growth in GDP Mainland Norway and contributions from demand components1. Percentage points. Annual rate
QNA Projection
2017 2018 2019 2020 2021 2022 2023 2024
GDP Mainland Norway 2.0 2.2 2.3 -2.5 3.6 3.8 2.6 2.3
with contributions from:
Consumption by households and non-profit organi-
sations 0.9 0.6 0.5 -2.6 1.5 2.9 1.5 1.3
General government consumption and investment 0.6 0.5 0.8 0.4 0.8 0.5 0.4 0.5
Petroleum investment -0.2 0.0 0.3 -0.1 -0.1 -0.2 0.3 0.1
Housing investment 0.4 -0.4 -0.1 -0.2 0.3 0.3 0.1 0.1
Other mainland investment 0.5 0.2 0.3 -0.3 0.1 0.2 0.1 0.2
Exports from mainland Norway -0.2 0.3 0.7 -1.3 0.7 1.2 0.7 0.6
Other factors etc. 0.1 1.1 -0.3 1.7 0.4 -1.0 -0.5 -0.5
1
See explanation under Figure 3.
Source: Statistics Norway.
months, which implies a rise of up to 10 per cent as newly proposed tax system increases the uncer-
an annual average in 2021. A moderate increase in tainty associated with our projections for the years
mortgage rates in the near future may curb the rise 2022–2024.
in prices. The high rise in house prices has made
residential construction more profitable, hous- Business investment fell markedly in 2020, particu-
ing investment has increased and our projections larly in manufacturing. The decline has come to a
show that it will continue to rise into next year. This halt, and there are now signs that investment will
will exert downward pressure on house price infla- grow moderately in the years ahead. Enterprises in
tion in the years ahead. Real house prices, adjusted both manufacturing and services report increased
for the rise in the consumer price index, therefore investment this year, and even higher investment
appear likely to remain unchanged up to 2024. in 2022. Several large projects are planned in the
fields of refined petroleum products, in chemi-
Overall petroleum investment fell by 4.1 per cent in cals and pharmaceuticals manufacturing, and in
2020. The petroleum companies’ investment plans rubber, plastics and minerals. Many enterprises
imply that overall investment activity will decline appear to be moving in a greener direction, and
a little this year and somewhat more next year. In several battery factories and hydrogen plants are
line with market expectations, we assume that the planned. Investment in power supply, on the other
oil price will gradually fall from the current level hand, appears to be declining, partly because sev-
of around USD 70 to around USD 60 per barrel eral large wind farms are expected to be complet-
towards the end of 2024. Prospects of a relatively ed by the end of 2021. On balance we forecast that
high oil price and the package of tax measures business investment will increase modestly this
adopted by the Storting in June 2021 are likely to year, but that growth will then pick up to around 3
contribute to increased activity in 2023 and 2024, per cent annually up to 2024.
when petroleum investment is expected to rise by
10 and 5 per cent, respectively. Given these de- The krone depreciated sharply in March 2020. The
velopments, overall demand from the petroleum euro cost around NOK 10 prior to the outbreak of
investment will push up mainland GDP growth by the COVID virus in Norway, but the krone depreci-
0.3 percentage point in 2023 (see Table 2). Even ated markedly in March last year when a euro cost
though we expect an increase in investment in just on NOK 12.0. The exchange rate then fell to
2023, the trend is for the importance of petroleum just under 10 kroner to the euro in May this year.
activities for the Norwegian economy to decrease The krone has subsequently weakened slightly
steadily over time. Petroleum investment as a again, and at the end of August a euro cost around
share of mainland GDP is expected to be barely 6 NOK 10.2. In our projections, we assume an un-
per cent in 2024, compared with 9 per cent in 2013. changed krone exchange rate going forward, based
The Government recently submitted a proposal on exchange rates at the end of August. On an an-
for restructuring petroleum taxation. Our projec- nual basis, this means a strengthening of the krone
tions are based on the current tax system. The from 2020 to this year, and a slight depreciation
from this year to next year.
3Economic Survey 3/2021 Norwegian economy
Table 3. Main economic indicators 2020-2024. Accounts and forecasts. Percentage change from previous year unless otherwise
noted
Acco- Forecasts
unts 2021 2022 2023 2024
2020 SN NB MoF SN NB MoF SN NB MoF SN NB
Demand and output
Consumption in households etc. -6.9 4.1 3.2 4.7 7.8 10.1 .. 4.0 3.2 .. 3.5 2.1
General government consumption 1.7 3.2 3.3 4.3 1.5 0.6 .. 1.2 0.0 .. 1.6 0.6
Gross fixed investment -3.8 1.2 .. 0.2 1.6 .. .. 3.3 .. .. 2.9 ..
Extraction and transport via pipelines -4.1 -2.0 -2.0 -5.4 -8.0 -6.0 .. 10.0 10.0 .. 5.0 8.0
Industries -6.1 1.6 0.2 0.0 3.4 2.6 .. 2.4 5.8 .. 2.9 6.5
Housing -4.0 6.0 4.6 6.4 5.5 2.6 .. 2.3 0.6 .. 1.6 1.1
General government -1.0 -1.6 .. -0.8 1.8 .. .. 1.0 .. .. 2.5 ..
Demand from Mainland Norway1 -3.9 3.3 3.0 3.9 5.0 5.5 .. 2.8 2.2 .. 2.7 0.5
Exports -0.5 2.8 .. 4.1 7.1 .. .. 4.2 .. .. 2.6 ..
Traditional goods2 -2.2 6.4 4.5 3.7 2.3 6.2 .. 2.9 2.9 .. 2.6 2.6
Crude oil and natural gas 10.1 0.3 .. 3.3 6.3 .. .. 4.3 .. .. 1.7 ..
Imports -11.9 2.5 0.9 3.0 8.5 10.7 .. 5.0 5.6 .. 4.3 4.8
Gross domestic product -0.8 3.0 2.9 3.7 4.1 3.6 .. 2.8 1.2 .. 2.2 1.0
Mainland Norway -2.5 3.6 3.8 3.7 3.8 4.1 .. 2.6 1.0 .. 2.3 1.0
Labour market
Employed persons -1.3 0.7 0.5 0.5 1.4 2.2 .. 0.8 0.5 .. 1.1 0.4
Unemployment rate (level) 4.6 4.7 3.5 4.4 4.4 3.6 .. 4.2 .. .. 3.9 ..
Prices and wages
Annual earnings 3.1 3.1 2.8 2.4 3.1 2.9 .. 3.2 3.1 .. 3.6 3.3
Consumer price index (CPI) 1.3 3.3 2.8 2.8 1.9 1.1 .. 1.5 1.3 .. 2.1 1.6
CPI-ATE3 3.0 1.9 1.7 2.0 2.2 1.3 .. 1.9 1.4 .. 2.0 1.6
Housing prices4 3.9 9.7 9.2 .. 4.4 1.0 .. 1.6 1.3 .. 1.7 2.9
Balance of payment
Current balance (bill. NOK)5 67 405 .. 224 468 .. .. 477 .. .. 417 ..
Current account (per cent of GDP) 2.0 10.4 .. 6.0 11.1 .. .. 10.8 .. .. 9.1 ..
Memorandum items:
Money market rate (level) 2.8 0.5 .. 0.6 1.2 .. .. 1.7 .. .. 2.0 ..
Crude oil price NOK (level)6 407 591 .. 557 597 .. .. 563 .. .. 536 ..
Import weighted krone exchange rate
(44 countries)7 6.7 -5.0 -7.0 -5.4 0.4 -2.3 .. 0.0 -0.7 .. 0.0 -0.2
1
Consumption in households and non-profit organizations + general government consumption + gross fixed capital formation in Mainland Norway.
2
Norges Bank forecasts exports of traditional goods and services from Mainland Norway. Ministry of Finance forecasts exports of goods exclusive of oil
and natural gas.
3
CPI adjusted for tax changes and excluding energy products (CPI-ATE).
4
Norges Bank forecasts the housing price index published by Eiendom Norge.
5
Current account not adjusted for saving in pension funds.
6
Average spot price. Brent Blend.
7
Increasing index implies depreciation. Ministry of Finance forecasts trade-weighted exchange rate.
Source: Statistics Norway (SN). Ministry of Finance. Meld.St.2. (2020-2021) (MoF). Norges Bank. Pengepolitisk rapport 2/2021 (NB).
There are prospects of higher underlying inflation. in the current year. Rising energy prices will raise
Underlying inflation measured by the 12-month the CPI by 1.9 percentage points this year, while re-
rise in the consumer price index adjusted for tax duced taxes will push growth down by 0.5 percent-
changes and excluding energy products (the CPI- age point.
ATE) rose by 1.1 per cent in July. Higher import pric-
es and labour costs will push up underlying infla- Norges Bank met the COVID crisis with interest rate
tion, and the underlying rise in prices will probably cuts, and the key policy rate has been 0 per cent
remain at around 2.0 per cent up to 2024. Inflation for just over a year. A zero interest rate is a sign of
measured by the increase in the overall consumer an economy in crisis. Given increased economic
price index (the CPI) is expected to be 3.3 per cent activity and a further reopening of society, the key
4Norwegian economy Economic Survey 3/2021
rate is likely to be raised from the current abnor- Figure 3. Contributions to growth in GDP Mainland Norway,
mally low level. As in our previous projection, we import adjusted
expect the first interest rate increase to come in Change from previous year in percent
6 6
September. Next year there may be a further three
interest rate hikes, and these will probably contin- 4 4
ue in 2023 and 2024. Assuming the key policy rate 2 2
follows this path, it will nonetheless take two years
before it again reaches 1.5 per cent, the level prior 0 0
to the lockdown in March 2020. -2 -2
-4 -4
Real wages appear set to fall weakly this year. In
this year’s wage negotiations, the Confederation 2017 2018 2019 2020 2021 2022 2023 2024
of Norwegian Enterprise (NHO), in agreement with Households consumption etc. General government
the Norwegian Confederation of Trade Unions Petroleum investments Housing investments
Other mainland invest. Mainland exports
(LO), estimated that annual wage growth in overall
Other factors GDP Mainland Norway
manufacturing under the NHO will be 2.7 per cent
in 2021. As manufacturing is the wage leader, this Source: Statistics Norway
establishes a norm for the other wage bargain- The demand contributions are calculated by finding the change in each
ing areas. The figures for average monthly basic variable, extracting the direct and indirect import shares, and then
dividing by the mainland GDP level for the previous period. The import
earnings for 2021 Q1 and Q2 reveal relatively high shares used are documented in Economic Survey 1/2019, Box 3. All figu-
underlying wage growth, given the wage leader res are seasonally adjusted and in constant prices.
norm. As in the previous quarter, Q2 growth was The export variable is defined as total exports excluding exports of crude
oil, gas and shipping.
largely driven by the private sector, particularly Other factors are defined as changes in stock and statistical deviations.
those industries upon which the pandemic has had
relatively little impact, such as construction and
retail trade. In the period ahead, wage growth is breaks in the time series, unemployment averaged
expected to pick up further, but increased em- 4.9 per cent for April, May and June, but the esti-
ployment among persons at a low wage level may mated effect of the break due to the restructuring
dampen the rise somewhat. On balance, we project of the LFS with effect from 2021 is uncertain (see
annual wage growth in 2021 of 3.1 per cent, which Box 2.1). Our projections show that unemploy-
is somewhat higher than the wage leader norm, ment measured by the LFS will be 4.7 per cent in
but still somewhat lower than the projected level of 2021, and then fall to around 4 per cent in 2023.
inflation this year. For the remainder of the projec- These projections are not adjusted for the break in
tion period, wage growth is expected to remain at the series. If adjustment is made for the assumed
just over 3 per cent annually. Given a risen in the break, unemployment in 2024 will be in line with
CPI of about 2 per cent in the same period, this the level in 2019.
translates into real annual wage growth of slightly
more than 1 per cent going forward. Both the Norwegian and the global economies
have now borne the mark of the COVID-19 pan-
More people are now entering the labour market. demic for around a year and a half. We forecast
The Labour Force Survey (LFS) revealed a surpris- trend mainland economic growth to be barely 2
ingly strong increase in both employment and the per cent this year. Although mainland GDP in June
labour force in Q2 this year. The labour supply is 2021 was back at the same level as in February
increasing among younger age groups in particular. 2020, the level in June was around 2.5 per cent low-
The combination of immigration restrictions, which er than the trend level in the economy. We forecast
curb competition from foreign workers, and in- that mainland GDP will increase by 3.6 per cent this
creased demand for labour in some service indus- year. The continued recovery is expected to be par-
tries such as accommodation and food services, ticularly pronounced in the areas that were hardest
may lead to more young people entering work in hit by the infection control measures. This applies
the course of the autumn. Unemployment remains in particular to service industries that experienced
at a high level, nonetheless. According to monthly a sharp decline last year, such as transport, accom-
LFS figures, seasonally adjusted and adjusted for modation and food services and administrative and
5Economic Survey 3/2021 Norwegian economy
support service activities. The long-term effects of Figure 4. General government
the global downturn and the national infection con- Seasonally adjusted, billion 2018 NOK, quarter
trol measures will mark the Norwegian economy 240 60
for a good while to come, however, and we do not 220 55
expect unemployment to reach what we regard as 200 50
a more normal level before 2023. 180 45
160 40
The uncertainty associated with future economic 140 35
developments is still substantial, and there appears 120 30
to be a greater probability of negative than of posi- 100 25
tive developments. The Delta variant is still advanc- 80 20
2009 2011 2013 2015 2017 2019 2021 2023
ing, both in Norway and globally, and Israeli data
suggest that the effect of the Pfizer vaccine de- Consumption (left axis)
Investments (right axis)
clines somewhat more rapidly than previously be- Transfers to households deflated by CPI (left axis)
lieved. New mutations of the virus may also arise.
At the same time, willingness to be vaccinated is Source: Statistics Norway
high in Norway, and the vaccines appear to provide
good protection against serious illness and death. ment administration, which includes roads, hous-
At the end of August, the Directorate of Health an- ing and public transport, pushed investment up. A
nounced that we are in a fourth wave of infection, number of tax changes have been introduced with
but as a consequence of vaccination, there is not a effect from 2021, and are discussed in more detail
strong wave of hospitalisations so far. The Institute in section 11. The projection scenario is based on
of Public Health accordingly concluded at the end the assumptions that other taxes are adjusted
of August that there was a very low likelihood of for inflation, tax rates remain unchanged, and tax
intensive care capacity being overextended in the thresholds are earnings-based.
time ahead. At the beginning of September, the
Government delayed stage 4 of the reopening in In the Revised National Budget (RNB 2021), the
order to restrict the spread of infection and keep government proposed expanded support meas-
the disease burden low until 90 per cent of the ures which brought the use of petroleum revenue,
population aged over 18 has been fully vaccinated. measured as the structural, non-oil budget deficit,
The authorities’ ambition is now that this vaccina- up to NOK 402.6 billion in 2021, almost NOK 90 bil-
tion target will be reached within 4–6 weeks. Our lion more than in the budget proposal last autumn.
projections are based on this scenario, but if these This deficit is equivalent to 3.7 per cent of the value
assumptions fail to hold true, economic recovery of the Government Pension Fund Global (the oil
will take longer than shown in our projections. fund). In 2022 we assume that spending of petro-
leum revenue, measured by the structural non-oil
1. Fiscal policy with phasing out of deficit as a share of the value of the oil fund, will be
extraordinary measures reduced to just under 3 per cent. However, growth
Central government consumption rose by 1.3 per in the value of the fund over time implies increased
cent in 2020 Q2 following a decline in Q1. More use of petroleum revenue measured in NOK.
normalised activity at hospitals, and increased ac-
tivity at universities and university colleges pushed Our projections are based on the assumption that
up consumption. Local government consumption most COVID-related measures will be discontinued
rose by 2.5 per cent in Q2 after falling in Q1. The in the course of the autumn when everyone in the
easing of infection control measures and increased adult population who has accepted the offer of
municipal health service activity pushed up con- vaccination has received a second dose, and that
sumption. Central government investment rose by the Norwegian economy will continue to recover in
2.3 per cent in Q2. Investment was pushed up by pace with the lifting of the infection control meas-
investment in new hospitals, which outweighed the ures. This development implies a change in fiscal
countering effect of delays in deliveries of fighter policy. Reduced government grants and transfers
aircraft. Gross local government investment rose and increased tax revenue will reduce the budget
by 11.6 per cent in Q2. Investment in local govern- deficit. However, the opposition parties, which
6Norwegian economy Economic Survey 3/2021
have a Storting majority, recently took the initia- Figure 5. Interest rate and inflation differential
tive for an extension of the furlough scheme. They between NOK and euro
Percentage point
propose industry-specific schemes after 1 October, 4 4
when the furlough scheme that has been in place
3 3
during the pandemic is scheduled to be discon-
tinued. Moreover, the spread of the Delta variant 2 2
and new variants of the virus are creating concern 1 1
about economic growth and the budget deficit go-
0 0
ing forward.
-1 -1
We assume in our prognoses that growth in gener-
-2 -2
al government activity will normalise in the course 2009 2011 2013 2015 2017 2019 2021 2023
of the projection scenario. We project percentage Interest rates: NIBOR 3 months - EURIBOR 3 months
changes in general government consumption and Inflation: CPI-ATE - HCPI-euro
gross investment of 3.2 and -1.6 per cent, respec- Source: Norges Bank and Statistics Norway
tively, in 2021. The projection for gross investment
growth, which was -1.1 per cent in the last report,
Figure 6. Norwegian interest rates
has been revised downwards as a consequence of
Percent
revised Q2 figures. Growth in general government 6 6
consumption in the current year, which was last
5 5
projected at 2.7 per cent, has been revised up-
wards as a consequence of increased spending, on 4 4
vaccines, among other things. The growth projec-
3 3
tions for the period 2022–2024 are extrapolations
2 2
of previous projections. High local government
tax revenue and a desire to prevent unemploy- 1 1
ment taking root at a high level may lead to a more
0 0
expansionary fiscal policy. Investment in a green 2009 2011 2013 2015 2017 2019 2021 2023
restructuring package may also lead to a rise in Banks' lending to households
public sector investment. However, the fiscal rule Households' deposits in banks
Norges Bank's policy rate
for use of petroleum revenue may place a damper
on the expansionary fiscal policy. Public transfers, Source: Norges Bank and Statistics Norway
which in the last report were expected to fall in real
terms by 1.8 per cent in 2021, are now expected to per cent, while the average deposit rate was 0.31
fall by 1.7 per cent as a consequence of extensions per cent.
of the furlough scheme. Labour market-related
transfers will be gradually reduced in the projec- The krone depreciated sharply around the time of
tion period, while pension disbursements will the lockdown in Norway, in March 2020. A week be-
increase in the long term. fore lockdown, a euro cost NOK 10.40. A week after
lockdown, the price of a euro was more than NOK
2. Towards normalisation of the interest rate 12.30, according to the official daily exchange rates
level noted by Norges Bank. The krone subsequently
In the course of less than two months in the spring appreciated, and through Q2 this year the price
of 2020, Norges Bank cut the key policy rate by of a euro was around NOK 10.00. The krone then
1.5 percentage points, to 0 per cent. Since the last weakened again, and in the last week of August a
interest rate cut, the three-month money-market euro cost roughly NOK 10.20, while a US dollar cost
rate has been in the range 0.2–0.5 per cent, and almost NOK 8.70. In our projections, we assume
at the end of August this year was 0.4 per cent. an unchanged krone exchange rate going forward,
Deposit and lending rates are also at record low based on exchange rates at the end of August. On
levels. At the end of Q2 this year, the average inter- an annual basis, this implies a strengthening of the
est rate on loans secured on dwellings was 2.02 krone from 2020 to this year, and a slight weaken-
ing from this year to next year.
7Economic Survey 3/2021 Norwegian economy
Figure 7. Exchange rates in the next few quarters. The unemployment rate
has fallen, and in 2024 will fall back to the same
130 13
level as in 2019 after correction for the restructur-
120 12
ing of the LFS (see Box 1). At the same time, the
110 11
rise in consumer prices appears likely to remain
100 10
close to the inflation target for the next few years.
90 9
This points to a normalisation of the interest rate
80 8
level. The prevailing uncertainty suggests nonethe-
70 7
less that this interest rate increase will take place
60 6
gradually. There may be a further three interest
50 5
2009 2011 2013 2015 2017 2019 2021 2023 rate increases by the end of next year, and hikes
Import-weighted exchange rate index, 1995 = 100 (left axis) will continue in 2023 and 2024. Given these inter-
NOK per euro (right axis) est rate developments, it will nonetheless be just
NOK per USD (right axis)
over two years before the key policy rate is back
Source: Norges Bank at the level before lockdown last year. The interest
rate on loans secured on dwellings will reach 3.5
per cent by the end of 2024.
3. Consumption on the rise again
Figure 8. Income and consumption in households
Seasonally adjusted, billion 2018 NOK, quarter
According to the quarterly national accounts, total
consumption in non-profit organisations fell by
440 440 6.9 per cent as an annual average in 2020, despite
strong growth through the second half of 2020.
400 400 After falling back temporarily by 3.6 per cent in
Q1 this year, compared with the previous quarter,
360 360
overall consumption picked up again by 3.4 per
320 320
cent in Q2. This rebound reflected a lower infec-
tion rate and a gradual easing of infection control
280 280 measures through Q2. Monthly growth was par-
2009 2011 2013 2015 2017 2019 2021 2023
ticularly strong in May, at over 4 per cent, while
Consumption
growth in June was about 2 per cent. The level of
Real disposable income
overall consumption was nonetheless almost 4 per
Source: Statistics Norway
cent lower in June this year than in February last
year, the month before lockdown in Norway.
In connection with the last interest rate cut in
spring 2020, Norges Bank signalled that the inter- Consumption of both goods and services escalated
est rate would remain unchanged for several years in Q2. The reopening of shopping centres and
to come. In subsequent editions of its Monetary shops in a number of municipalities led to strong
Policy Report in 2020, Norges Bank foresaw a growth in purchases of clothing, footwear, cars,
cautious rise in the interest rate from the first half furniture and household equipment. Growth of
of 2022. In the Monetary Policy Report published almost 1 per cent in April, as much as 5.3 per cent
in March this year, the forecast of a first increase in May, and zero in June raised goods consump-
in the interest rate was brought forward to the tion by 3.6 per cent for Q2 as a whole. The goods
second half of this year, before the June report consumption index for July shows a further season-
indicated September as the probable month for an ally adjusted increase of 1.2 per cent on the previ-
interest rate hike. ous month. As infection control measures placed
stringent restrictions on consumption of services,
As in our previous projection, we expect the first households adapted by increasing their consump-
interest rate hike to come in September. Growth in tion of goods. The level of goods consumption has
the Norwegian economy was high in Q2 this year, thus risen substantially through the pandemic, and
and the reopening will lead to further solid growth was about 14 per cent higher in July than in Febru-
ary last year. After falling sharply for two succes-
8Norwegian economy Economic Survey 3/2021
sive quarters, consumption of accommodation and key policy rate. Towards the end of the projection
food service rose by a full 9 per cent in Q2. Much of period, the level of the household interest bur-
this growth can probably be attributed to the eas- den will rise to a good 6 per cent, which is slightly
ing of the national restrictions on serving alcohol. higher than the average for the past 20 years. As
Overall, consumption of services showed increas- in our previous report, we envisage that towards
ing growth in April, May and June, with growth of the end of 2021 overall consumption will rise to the
2.4 per cent in Q2. Nonetheless, the level of service same level as prior to lockdown last year and will
consumption was about 10 per cent lower in June continue to increase by close to 8 per cent in 2022.
than in the month prior to lockdown last year. These figures are based on the assumptions that
vaccination of the population continues, there are
Norwegians’ consumption abroad has also fallen no further business sector shutdowns and house-
sharply through the pandemic. Although the holds’ pent-up demand from 2020 and the first
relaxation of rules for foreign travel in June led to half of this year persists. However, there is greater
a doubling of Norwegians’ consumption abroad uncertainty associated with the projections than
compared with May, the level for this consumption when the previous report was published because
category was more than 90 per cent lower in June of the spread of the Delta variant. With prospects
this year than in February last year. The level of of growth in real disposable income, but weak
foreigners’ consumption in Norway, which has also developments in real house prices, and hence also
suffered during the pandemic, has fallen by the in real wealth, consumption is forecast to grow by
same order of size in the same period. a good 3.5 per cent as an annual average in the last
two years of the projection period.
Growth in household real disposable income, both
with and without share dividend disbursements, As household income remained at a high level
is estimated in the non-financial sector accounts while consumption fell sharply during the pandem-
to have been around 2.5 per cent in 2020. Wage ic, the saving ratio, measured as saving as a share
income, which is the most important source of of disposable income including disbursements of
household income, displayed weak developments share dividends, rose from around an annualised
last year, as employment fell sharply due to the average of 7.5 per cent in 2019 to a record high
infection control measures and the periodic shut- 15.4 per cent in 2020. In the last published non-fi-
ting down of parts of the business sector. Public nancial sector accounts, the level of the seasonally
transfers, on the other hand, grew substantially as adjusted saving ratio was estimated to be around
a result of record high disbursements to a large 16.5 per cent in Q2 this year. The saving ratio ex-
number of furloughed and unemployed workers. cluding disbursements of share dividend increased
Thanks to record low lending rates, reduced net from around 3 per cent in 2019 to just over 11
interest expenses also pushed up income growth per cent in 2020. Our projections for income and
last year. The household interest burden, i.e. inter- consumption developments indicate that the
est expenses measured as a share of disposable saving ratio will fall to 13.5 per cent this year, and
income, fell from 5.5 per cent in 2019 to 4.7 per gradually further to around 7.5 per cent in 2024.
cent in 2020. This is about 0.5 percentage point higher than the
average annual saving ratio for the ten-year period
We now assume that average annual growth in 2010–2019. The saving ratio excluding share divi-
real disposable income excluding share dividend dend disbursements will fall to around 4.5 per cent
disbursements will be barely 3 per cent in the years towards the end of the projection period.
2021–2024, i.e. slightly higher than last year. Wage
growth will rise in pace with increased employ- 4. Slowing house price inflation
ment in a gradual normalisation of the Norwegian According to Statistics Norway’s seasonally adjust-
economy. Conversely, public transfers will fall in ed house price index, house prices rose by 2.7 per
real terms in the current year as the pandemic fur- cent for Norway as a whole in Q2, following a rise
lough schemes lapse by degrees. Net interest ex- of 3.5 per cent in Q1 this year and around 3 per
penses will also curb growth in real income in the cent in both Q3 and Q4 last year. Prices in Q2 this
years 2022–2024 when the mortgage rates faced year were more than 12 per cent higher than in Q2
by households increase in pace with the rising last year. The rise in house prices has thus been
9Economic Survey 3/2021 Norwegian economy
Figure 9. Housing market materials have a countering effect. Our projections
Seasonally adjusted. Left axis: billion 2018 NOK, quarter
indicate nonetheless that housing investment will
Right axis: index, 2018 = 100
60 120
rise by around 6 per cent this year, and by almost
the same amount next year. Growth will then slow
55 110
appreciably, partly in response to higher interest
50 100 rates. According to our projections, the level of
45 90
housing investment towards the end of the projec-
tion period, in 2024, will be somewhat higher than
40 80
the previous peak in 2017.
35 70
30 60 Higher housing investment leads to a larger sup-
2009 2011 2013 2015 2017 2019 2021 2023
ply of dwellings, which in isolation pushes down
Housing investment (left axis) house prices. The expected rise in mortgage rates
Real house prices (right axis)
will have the same effect. At the same time, there
Source: Statistics Norway
are factors that point to a continued rise in house
prices going forward. Although interest rates are
strong this past year, indicating that the record-low expected to rise moderately in the years ahead,
mortgage rates and to some extent enforced sav- they will remain at a historically low level. Thus
ing have outweighed other factors such as moder- they will provide a continued incentive for bor-
ate income growth and weak population growth. rowing, which will fuel a rise in house prices. Our
projections indicate that annual debt growth will be
Now, however, there are signs that the rise in in the range 4–5 per cent throughout the projec-
house prices is slowing. This can be seen most tion period. Household income growth will moreo-
clearly in the monthly house price statistics of Real ver increase somewhat in pace with the economic
Estate Norway. According to these statistics, house recovery.
prices in July were only 0.3 per cent higher than
they were in March, and they fell in July in all major On balance, we forecast that house prices will rise
cities except Bergen. This slowing is in many ways by up to 10 per cent this year. This projection is
anticipated, given the high level of house prices roughly the same as in our previous report, mean-
and the expected and imminent interest rate hike. ing that there will only be a very moderate rise for
the remainder of the year. For the years ahead we
Housing market activity, measured as the number assume a gradual slowing of house price inflation,
of resale homes sold, has been unusually high from just on 4 per cent in 2022 to slightly under 2
through the second half of 2020 and so far this per cent in 2023 and 2024.
year. According to Real Estate Norway, the number
of resale homes sold in the first seven months of 5. Petroleum investment rises to the 2019
this year was 9 and 11 per cent higher than in the level
same period in 2020 and 2019. As a result, there Growth in petroleum investment of as much as
are now relatively few resale homes for sale. This 12.6 per cent in 2019 was followed by a decline of
scarcity will probably prevent house prices falling 4.1 per cent last year, according to national ac-
substantially in the near term. Sales of new dwell- counts figures. After a fall of 3.6 per cent in Q1
ings have also been high so far this year, following this year, seasonally adjusted figures show growth
low sales through much of last year. of 4.3 per cent in Q2. This growth was driven by
higher activity in the investment areas exploration
According to the quarterly national accounts, hous- and fields in operation. In the first half of 2021, the
ing investment rose by almost 4 per cent in Q2 volume of petroleum investment was 4.9 per cent
following a fall of 1 per cent in Q1. Several factors lower than in the first half of 2020.
point to investment increasing further in the near
term. Developments in sales of new dwellings and Statistics Norway surveys the petroleum compa-
in housing starts are positive, and the high house nies’ investment plans in the quarterly survey of
prices coupled with the still low interest rates make intended investment in oil and gas, manufacturing,
residential construction profitable. Higher costs for mining and power supply (KIS). In the last sur-
10Norwegian economy Economic Survey 3/2021
Figure 10. Petroleum investments and oil price of events in 2021, some of the fall in investment
Seasonally adjusted. Left axis: billion 2018 NOK, quarter
in the first half of the year will be recouped in the
Right axis: USD per barrel
second.
60 120
For the last 20 years, the projection published in
50 100
Q3 of the investment year has been 3.9 per cent
40 80 higher on average than the final investment total.
Last year the projection was 2.9 per cent in Q3,
30 60
and postponements of planned investments to
20 40 the following year were thus less than in a normal
year. The design of the oil tax package may give
10 20
2009 2011 2013 2015 2017 2019 2021 2023 licensees an extra incentive to implement as many
Investments in extraction and transport in pipelines (left axis) of their investment plans as possible in the course
Oil price (right axis) of 2021. All types of investment apart from shut-
Source: Statistics Norway downs and abandonment are covered by the tem-
porary tax rules until the end of 2021. From and
vey, conducted in August, investment this year is including 2022, investments forming part of plans
projected to be NOK 181.5 billion, in current value. for development and operation (PDOs) that were
This is approximately the same level as reported in approved before 2020 will no longer be covered by
the previous survey, and indicates a decline of 1.6 the favourable tax rules. It will therefore be more
per cent this year compared with corresponding costly than usual to postpone this type of invest-
projections for 2020 published in August last year. ment until the following year. We assume that this
The decline is driven by a clear fall in field develop- will result in investment postponements from 2021
ment. The phasing down of large developments to 2022 being somewhat less than normal, and
from 2020 to 2021 is not being compensated for by roughly the same as last year. Nominal investment
new field developments to any appreciable extent. this year will then be 1.5 per cent lower than last
The decline is being slowed by growth in explora- year. Assuming a rise in prices for capital goods of
tion and fields in operation in particular. Explora- 0.5 per cent this year, this will mean a 2 per cent
tion activity has picked up again this year after fall in real investment this year, which is marginally
being cut last year as a consequence of very low oil weaker than in our projections published in the
prices attributable to the COVID-19 pandemic. previous economic report.
The projection for 2021 has grown by a full 25 per The nominal forecast for 2022 in the most recent
cent since the 2020 Q2 survey. In addition to cost investment intentions survey is approximately NOK
overruns on some developments, the unusually 142 billion, which represents a slight downward
strong increase in the estimate is related to the revision from the May forecast. Historical figures
rise in the oil price since last autumn, and with the from the survey show that it is unusual for invest-
introduction of temporary changes in the petro- ment plans to be reduced at this stage of the cycle.
leum taxation system adopted by the Storting in The forecast is 4.4 per cent lower than the cor-
June 2020. responding figure for 2021, published in August
2020. The forecasts for field developments in par-
Realisation of the projection for 2021 presupposes ticular are contributing to the decline, this year and
investment growth of about 9.7 per cent from the next. The reason is that the loss of investment in
first to the second half of this year. Figures from connection with the phasing out of developments
the last 20 years show that, on average, invest- is not being compensated for by investment in new
ment has been about 10 per cent higher in the developments. Extensive overruns reported for
second half of the year than in the first. Petroleum several developments in the autumns of the last
investment is seasonal, with the level of activity two years have substantially raised the forecasts
tending to rise through the year. Developments for the following year. The overruns are mainly
in 2020 were flatter than normal, with growth of attributable to a few projects which are now either
only 1.1 per cent from the first to the second half complete or phased down, so that the risk of such
of the year. Given a more typically seasonal course major overruns is lower. We therefore assume that
11Economic Survey 3/2021 Norwegian economy
the increase in the forecasts due to overruns will are based on the current tax system. The proposed
be lower for 2022 than in the previous two years. new tax system increases the uncertainty associ-
ated with our projections for the years 2022–2024.
The temporary tax rules appear likely to trigger and
accelerate a very large number of development In the first half of this year, oil and gas extraction,
projects in 2022. As decisions to develop most of measured in energy equivalent, was 2.3 per cent
these are not expected to be taken until 2022 Q4, lower than in the same period last year. Liquid
we assume that no substantial investments will production decreased by 1.6 per cent, while gas
accrue to these projects that same year, particu- production in the first half of the year was 3 per
larly in view of the fact that projects tend to have cent lower than in the same period in 2020. If the
least investment in the first year of development. Norwegian Petroleum Directorate’s forecast for the
Although the temporary tax rules will cease to ap- second half of 2021 is accurate, oil and gas extrac-
ply to investment in older PDOs at the end of 2021, tion will increase by 1.6 per cent this year. Extrac-
these favourable tax rules will continue to apply to tion growth is projected to be 5.6 per cent in 2022.
additional investment associated with any changes The Directorate also expects petroleum production
in or expansions of the PDOs. This will probably to continue increasing further on in the projection
contribute to somewhat higher investment in fields period, but at a declining rate.
in operation than currently assumed in the forecast
for 2022. Given these assumptions, we forecast a 6. Weak business investment – but some
8 per cent fall in the volume of petroleum invest- light ahead
ment in 2022. The fall is more pronounced than Business investment increased by 1.1 per cent in
projected in the previous economic report, mainly Q2 this year, thereby recouping the Q1 fall, accord-
because the investment survey's forecast for 2022 ing to national accounts figures. The rebound was
was weaker than expected. driven by both services and manufacturing, with
investment increases of 3 and 2.2 per cent, respec-
Investment in development projects is usually high- tively.
est in the second and third years of the develop-
ment phase. The very large numbers of PDOs ex- Statistics Norway surveys the investment plans of
pected to be submitted in 2022 are therefore likely manufacturing enterprises. The enterprises have
to generate very high development investment revised their investment plans upwards in the
in 2023 and 2024. We project 10 per cent growth last two surveys, and the August figures point to
in volume in 2023 followed by more moderate growth of 6.3 per cent in 2021 compared with cor-
growth of 5 per cent in 2024. These figures imply responding figures for 2020. The overall upturn in
a slight reduction in the investment level for these manufacturing investment is attributable to broad-
years compared with the projections in the previ- based growth, with basic metals and repair and
ous report. The reason is that a couple of projects installation of machinery contributing most. In-
that were planning to deliver PDOs by the end of vestment developments so far this year have been
2022 have now postponed these projects. We allow relatively weak, however, and the level of invest-
for the possibility that this may also happen with ment remains below that in 2020 Q1. A substantial
more of the planned projects. This would put the upturn in manufacturing investment will therefore
investment level in 2024 on roughly the same level be necessary in the months ahead if the reported
as in 2019. The new UN climate report is creating investment estimates are to be realised.
greater uncertainty in connection with political
sentiment concerning Norwegian petroleum policy. Enterprises’ investment forecasts for 2022 have
This is a downside risk in our investment projec- also been revised upwards since the last survey,
tions, particularly for exploration activities in the and manufacturing companies are expecting a
latter years of our projection period. The Govern- surge of 24 per cent in 2022. A number of large
ment recently proposed replacing the petroleum projects in the industry groups refined petroleum
tax system with a cash-flow tax system, with effect products and chemicals and pharmaceuticals
from 2022. If the proposal is adopted, it will not manufacturing, and in rubber, plastic and minerals,
replace the temporary tax rules that were intro- are pushing up the level of investment. At the same
duced as a result of the pandemic. Our projections time, mining investment is forecast to be cut by a
12Norwegian economy Economic Survey 3/2021
Figure 11. Investments Mainland Norway Many companies postponed investment last year
Seasonally adjusted, billion 2018 NOK, quarter because of market uncertainty. There is now less
uncertainty, and the expected upswing in invest-
80 16
ment is relatively broad-based. Despite new vari-
70 14 ants of the virus, we have assumed in our projec-
tions that there will be no new business sector
60 12
shutdowns and that the re-opening of society will
50 10 continue in pace with vaccination of the popula-
tion. We forecast that major investment associated
40 8
with renewable energy will only come at the end of
30 6 the projection period.
2009 2011 2013 2015 2017 2019 2021 2023
Total (left axis)
Services (left axis)
On balance, we forecast an upswing in business
Manufacturing (right axis) investment of slightly over 1.5 per cent this year.
According to our projections investment growth
Source: Statistics Norway
will be about 3 per cent in 2022, and somewhat
good 10 per cent. On balance, growth in mining lower in 2023, after which investment growth will
and manufacturing is projected to be 18 per cent in pick up to some extent. Given these developments,
2022. business sector investment will be a good 4 per
cent higher than the 2019 level by the end of the
The projection for investment in power supply in projection period.
2021 has been revised down since the last survey,
and is now 15 per cent lower than the correspond- 7. Foreign trade less affected by the
ing projection for 2020. Several large wind power pandemic
developments are expected to be completed by The pandemic and infection control measures have
the end of 2021, and for the present no new major set their mark on global trade. After a downswing
wind power projects are expected to be started up. in the first half and an upswing in the second half
Consequently, a further 23 per cent fall in invest- of 2020, aggregate exports and imports both fell in
ment in this area is expected in 2022. Q1 this year. The decline was greater for imports
than for exports. In Q2, aggregate exports in-
The June report of Norges Bank's regional net- creased more than aggregate imports. In addition,
work, which surveys businesses’ view of economic export prices rose more than import prices in both
developments in Norway, indicates that investment quarters. All in all, the export surpluses and terms
in service industries will be higher than planned by of trade gains resulted in rising and record high
enterprises earlier this year, and is now projected trade surpluses in both Q1 and Q2.
to grow by more than 5 per cent in the next 12
months. Investment in services accounts for about Goods exports from mainland Norway have grown
60 per cent of total business investment. in the past four quarters, while growth slowed and
was barely positive in Q2 this year. Reduced ex-
In the years ahead, investment may be significantly ports of refined petroleum products pushed down
affected by climate change policies and a transition growth considerably in Q2. Oil and gas exports
to renewable energy. According to Norges Bank's made a major contribution to a decline in over-
regional network’s survey of enterprises, such a all exports in Q1 and to an increase in Q2. More
transition will on balance result in increased invest- stringent infection control measures in these two
ment in mainland companies. There are already a quarters led to a further decline in foreigners’ con-
number of battery factories and hydrogen plants in sumption in Norway after a temporary upswing in
the start-up/planning phase, and some companies autumn 2020. Consumption prior to the pandemic
have launched pilot facilities. If these companies was more than five times as high as in Q2 this year.
are successful in their technological development, The decline in foreigners’ consumption in Norway
and plans for full-scale production are realised, it in Q2 accounted for half of the decline in service
will mean tens of billions of kroner in investment. exports as a whole. The pandemic in general and
infection control restrictions in particular have
13Economic Survey 3/2021 Norwegian economy
Figure 12. Exports Figure 13. Imports
Seasonally adjusted, billion 2018 NOK, quarter Seasonally adjusted, billion 2018 NOK, quarter
440 220
320 320
400 200
360 180 280 280
320 160
240 240
280 140
200 200
240 120
200 100 160 160
160 80 120 120
2009 2011 2013 2015 2017 2019 2021 2023 2009 2011 2013 2015 2017 2019 2021 2023
Total (left axis) Total
Traditional goods (right axis) Traditional goods
Source: Statistics Norway Source: Statistics Norway
impacted exports of services more than exports of generate a major current account surplus. Meas-
goods. ured as a share of GDP, the surplus could be more
than 10 per cent annually in the projection period
Export prices for mainland goods and services, and 2021–2024.
in particular for oil and gas, increased quite strong-
ly in Q1 and Q2. Some of the increases can be at- 8. Normalisation of activity level anticipated
tributed to a weakened krone. The rise in prices for The most recent national accounts figures show
refined petroleum products accounted for about that the Norwegian economy had bottomed out of
half of the rise in prices for mainland goods. Higher the second downturn triggered by the COVID-19
prices for domestic and international shipping pandemic. A lower infection rate, more vaccina-
raised the price index for overall service exports in tions and reopening of society led to economic
Q1 and Q2, respectively. growth picking up again in Q2. There was growth in
each month of the quarter, and in June mainland
Mainland goods imports increased more in Q2 this GDP was at approximately the same level as prior
year than they decreased in Q1. Imports of vehi- to the pandemic. The result is economic develop-
cles, machinery and equipment and textiles, cloth- ment following a W-shaped course, with an unusu-
ing and footwear increased most. Import prices fell ally sharp upturn in autumn 2021 and a lesser one
for these product groups, while mainland goods now.
imports as a whole increased in price.
Although mainland GDP in June was back at the
The COVID-19 pandemic is not over, but a steadily same level as before March 2020, the economy
higher degree of vaccination and reduced infec- was still strongly affected by the pandemic. The
tion control measures nationally and internation- mainland economy normally grows by just under 2
ally will stimulate exports as well as imports in the per cent annually. The fact that in June 2021 main-
period ahead. We assume that trade in goods will land GDP was back at the same level as in February
pick up before trade in services. Travel and tour- 2020 means that the level is still around 2.5 per
ism in particular, but also other trade in services, cent lower than what we regard as trend.
as well as exports of oil and gas, will only increase
from next year. The increase in aggregate demand The Norwegian economy was not in a normal
among trading partners who have been harder hit situation at the end of the first half of 2021, but
by the pandemic is assumed to be stronger than in the imbalances were shrinking. Service industries
Norway, and this will stimulate exports more than such as accommodation and food services, trans-
imports. Export surpluses and terms of trade gains port and cultural services have been hard hit since
are expected to increase the trade surplus this year March 2020. Despite a strong upswing in Q2 this
and probably next year. Added to a high and grow- year, activity in these industries remained low in
ing income and current transfers surplus, this will June. Goods consumption, however, has grown sig-
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