Oil’s Plunge Takes Toll on Norwegian Economy

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August 20, 2015


By Saleha Mohsin

(Bloomberg) — Norway’s economic growth slowed in the second quarter as plunging crude prices sap investments and drive up unemployment in western Europe’s biggest petroleum producer.

Seasonally adjusted gross domestic product, excluding oil, gas and shipping, grew 0.2 percent, after expanding a revised 0.3 percent in the first quarter, Oslo-based Statistics Norway said on Thursday. Mainland growth was seen at 0.2 percent in a Bloomberg survey. Total output shrank 0.1 percent.

“We have confirmation that the economy is decelerating,” said Kjersti Haugland, an analyst at DNB ASA. “There will be a prolonged period of slow growth” as the impact of lower oil prices feeds into the economy, she said.

The slump in oil prices is proving painful for Norway’s economy, with almost half its exports related to petroleum. Crude producers and service companies such as state-controlled Statoil ASA have cut more than 20,000 jobs, sending ripples through an economy where one in nine jobs depends on oil.

The krone declined 0.3 percent to 9.2426 per euro as of 10:29 a.m. in Oslo. It earlier reached its weakest level since January.

Exports fell 0.1 percent in the second quarter, while petroleum and shipping industry output declined 1 percent, the statistics agency said. Consumer spending rose 0.6 percent. Gross fixed capital formation dropped 1.3 percent.

While unemployment remains enviably low compared with most of the rest of Europe, it reached 4.3 percent in May, the highest level in about a decade.

Norway’s central bank cut rates in June for a second time since the price of Brent crude started dropping. It also signaled a probability as high as 70 percent that it will cut again this autumn. The krone has lost about 11 percent in the last year amid concern Norway’s economic slump will deepen as oil prices continue to fall.

©2015 Bloomberg News

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