OSLO: The Norwegian economy had started this year on a strong footing. The economy had unexpectedly registered a strong growth of 1 percent quarter-on-quarter on seasonally adjusted basis in the first quarter. But after looking at it closely, it is evident that the growth was predominantly because of government consumption spending and the oil and gas sector. A renewed increase in the oil price underpinned the oil and gas sector. The growth dynamic in the second quarter weakened again and the economy stagnated. Furthermore, it shrank slightly in the third quarter.
Even if the oil price has rebounded slightly, it continues to trade more than 50 percent below the levels witnessed in mid-2014. This is the reason that the Norges Bank kept its usually negative economic outlook during its meeting in September. It was more pessimistic in June, with a growth outlook of just 0.1 percent in the overall year, noted Commerzbank in a research report. Even if the central bank has made a new projection of a 0.7 percent growth, it still assumes that the Norwegian economy is expected to stay weak because of a contracting oil and gas sector.
The Norges Bank’s pessimism is believed to be excessive. Even if the low oil prices is expected to continue exerting pressure on investments for some time, business confidence has rebounded. Moreover, domestic consumption continues to stay strong. Moreover, net exports had contributed positively in the second and third quarter and are expected to continue developing positively as long as oil price continues to stay stable, according to Commerzbank.
