Norway: Economy exits technical recession in Q4
The Norwegian economy exited a technical recession in the final quarter of 2023, as total GDP expanded 1.5% in seasonally adjusted quarter-on-quarter terms (Q3: -0.4% s.a. qoq). Similarly, the mainland economy—which excludes petroleum activities and related ocean transport—improved, with growth doubling to 0.2% in Q4 from Q3, beating market expectations.
The total economy’s upturn reflected both a broad-based improvement and a low base effect. Domestically, private consumption spearheaded the improvement: It rebounded and tallied a 0.7% increase in Q4 (Q3: -0.1% s.a. qoq), reflecting higher electricity consumption and employment. Similarly, fixed investment growth accelerated to 1.8% (Q3: +0.1% s.a. qoq), the strongest rise since Q1 2022. Conversely, government spending growth slowed to 1.0% in Q4 (Q3: +1.2% s.a. qoq).
Turning to the external sector, exports of goods and services rebounded to 3.3% (Q3: -1.3% s.a. qoq) amid higher crude oil and natural gas exports. Meanwhile, imports of goods and services contracted by a slower 0.7% (Q3: -4.0% s.a. qoq).
Meanwhile, on a seasonally adjusted annual basis, total economic activity returned to growth and expanded 1.0% (Q3: -1.5% s.a. yoy). Conversely, mainland economic activity growth waned to 0.5%, down from Q3’s 0.7% rise.
Consequently, the total economy grew 0.8% overall in 2023 (2022: +3.0%), while mainland GDP posted a 0.7% increase, slowing notably from 2022’s 3.7% rise.
Looking ahead, our Consensus is for total quarter-on-quarter GDP growth to slow in Q1 on a high base of comparison. That said, our panel expects momentum to pick up through Q4 2024 and for total growth this year to remain largely unchanged from 2023. Lower inflation and interest rate cuts will lend support to private spending, and exports of goods and services growth will improve, largely outweighing slowdowns in government spending and fixed investment growth.
Analysts at the EIU provided further insight regarding Q4’s rebound:
“The strong growth in the fourth quarter was mainly driven by the performance of the hydrocarbons sector. Volume growth in petroleum activities increased by 6.2% quarter on quarter, reflecting a rise in Norwegian gas exports to Europe to an all-time high in December, as maintenance work earlier in the year increased capacity at the Kollsnes processing plant near Bergen. Given that hydrocarbons account for 40% of exports, this trend also translated into strong growth in overall goods and services exports.”