Tough start to the year for Norwegian and Swedish economies

The economies of Norway and Sweden contracted in the first quarter of the year, weighed down by Covid restrictions, official statistics showed on Friday.

Norway's economy took a slight dip in the first quarter of the year. Pictured is Oslo. Photo by Marian Rotea on Unsplash.

But the two Scandinavian countries are still expecting robust growth for the year as a whole, despite the conflict in Ukraine and the tough start to 2022.

Sweden’s gross domestic product fell by 0.4 percent in the first quarter compared with the last three months of 2021, according to its SCB statistics agency.

Norway’s GDP fell by 0.6 percent, excluding hydrocarbon production and maritime transport, its SSB statistics service said.

The solid recovery seen in March, with growth of 1.0 percent in both countries, was not enough to erase the decline due to the Omicron variant at the very start of the year, when Covid restrictions were still in place.

READ ALSO: What the revised national budget in Norway means for foreigners

The Norwegian government expects vigorous growth in 2022, though it brought its estimate down slightly on Thursday in a revised draft budget — to 3.6 percent from the 3.8 percent previously expected.

The Bank of Norway has already raised its key rate three times since September, and has hinted at several more hikes in the coming months.

Its Swedish counterpart also began tightening monetary policy in April, pushing its rate above zero for the first time since September 2014.

The Swedish government expects growth of 3.1 percent for the year as a whole.

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Russia’s invasion of Ukraine causes losses for Norway’s sovereign fund

Norway said Thursday its sovereign wealth fund, the world's largest, lost $74 billion during the first quarter of the year due to the market turmoil caused by the war in Ukraine.

Russia's invasion of Ukraine causes losses for Norway's sovereign fund

The loss of 653 billion kroner, or 68 billion euros, represents a drop of 4.9 percent in the value of the fund which Norway has built up with revenue from its oil exports, said the central bank.

“The first quarter has been characterised by geopolitical turbulence, which has also affected the markets,” said the deputy head of the fund, Trond Grande, in a statement.

The value of the fund’s equity assets, which account for just over 70 percent of the total, fell by 5.2 percent in the first three months of the
year.  The bond portfolio, which accounts for a bit more than 26 percent overall, slumped 4.8 percent.

Unlisted property investments saw a 4.1 percent rise in value. Last month, the fund estimated that its Russian assets had been reduced to a tenth of their value, over the war in Ukraine and sanctions imposed on Russia.

According to a real-time ticker on the central bank’s website, the current value of the wealth fund is 11.47 trillion kroner, or 2.1 million kroner for each of the country’s 5.4 million people.