Norway’s economy suffered ‘deepest ever’ dip in second quarter

The Norwegian economy shrank in the second quarter of 2020 by the largest amount ever measured by the country’s national statistics bureau.

Norway’s economy suffered 'deepest ever' dip in second quarter
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Norway's gross domestic product (GDP) – one of the main indicators of the health of the national economy – fell by 6.3 percent in the second quarter of 2020.

Statistics Norway reported growth of -6.3 percent in the second quarter, by far the biggest drop ever measured by the agency for such a period.

Economic activity was 6 percent lower in June than in February, contributing to the hammer blow to the country’s economy, the agency said.

The report nevertheless contained some cause for optimism, with growth of 3.7 percent in GDP for mainland Norway for the month of June.

The introduction of wide-ranging societal lockdown on March 12th is cited by Statistics Norway as the cause of a “sharp fall” in economic activity in the country throughout the spring.

Mainland Norway’s GDP fell by 7.3 percent in March and then by a further 4.1 percent in April. The service industry was particularly hard hit by the downturn.

May and June saw significantly increased activity following the gradual reopening of most of society. Season-adjusted figures show GDP growing by 2.2 percent in May and 3.7 percent in June.

“The largest contribution to growth in June came from health and social care services. This is primarily due to activity at hospitals returning to normal levels,” Statistics Norway’s head of department for national economy Pål Sletten said in comments published by the agency.

Business services, hospitality, culture, entertainment and other services, transport and international maritime transport also contributed to growth towards the end of the second quarter.

The preliminary figures carry a larger element of uncertainty that under normal circumstances, Sletten said.

“We have had to use new data sources to assess completely unusual disruption to the Norwegian economy. The figures may be revised once we have a better data basis,” he said.

Quarterly GDP figures have been recorded since 1978. The previous largest-recorded quarterly downturn was in Q4 in 2008, during the Global Financial Crisis, when Norway’s GDP shrank by 2.3 percent.

That is now the second-largest recorded downturn, with the third-largest also having taken place in 2020, during Q1.

“After the dramatic downturn in activity in March and April, mainland economy in June was under halfway back from the lowest point. Thereby, the second quarter was almost three times as bad as the worst quarter during the (2008) financial crisis,” Sletten said.

The trend in Norway is comparable to that in other Nordic countries, he noted.

“There are some differences as to whether the downturn came in the first or second quarter of 2020, but the overall downturn since the fourth quarter of 2019 is of the same magnitude in Norway, Sweden and Denmark,” he said.

Denmark's GDP fell by 7.4 percent in the second quarter of 2020 compared with the first quarter, while Sweden’s fell by 8.6 percent.

Eurostat published at the end of last month its latest available flash estimates of GDP growth in EU countries:

EU average: -11.9
Belgium: -12.2
Czechia: -8.4
Germany: -10.1
Spain: -18.5
France: -13.8
Italy: -12.4
Latvia: -7.5
Lithuania: -5.1
Austria: -10.7
Portugal: -14.1

READ ALSO: 'Sweden best of a bad bunch': Nordic economies to weather corona crisis better than rest of Europe

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Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.