GDP for Mainland Norway decreased 2.5 per cent in 2020

The 2.5 per cent annual downturn means that the Norwegian economy did relatively well through 2020 compared to other countries.¹ In the 4th quarter 2020, Mainland GDP was 1.3 per cent lower than in the 4th quarter of 2019, seasonally adjusted figures from the National accounts show. In most large European countries, the downturn has been considerably strongere. 

- Preliminary accounts show that the downturn in 2020 was somewhat lower than we feared when restrictions were at their peak in March and April last year. This is, however, still the largest annual downturn measured for the Mainland Economy since estimations began in 1970, and it is probably the greatest economic downturn since the Second World War, says head of the National Accounts at Statistics Norway, Pål Sletten.

The Norwegian economy in 2020 was characterized by large movements through the year, and large differences in separate industries. Though the downturn in March and April hit broadly, service industries were particularly impacted as infection control measures halted activity. During the fall we had a gradual recovery in parts of the economy, which dampened the annual downturn.

The economic downturn was damped by the fact that 2020 had 3 more business days than 2019, which in isolation increased GDP for Mainland Norway by 0.6 per cent.

Despite the Corona Pandemic, oil and gas production experienced good growth in 2020. Activity levels rose nearly 9 per cent in volume, mainly due to the large Johan Sverdrup oil field which started operating during the fall of 2019. As a result, the total GDP downturn, including oil and gas extraction,pipeline transportation and ocean transport was at a mere 0.8 per cent.

National accounts for the 4th quarter and December 2020

Towards the end of October, the Covid-19 infection rate increased in Norway and infection control measures were tightened. The resulting economic effects came in November, as activity levels fell by 0.6 per cent. In December Mainland growth was at 1 per cent, primarily because of growth in energy production and aquaculture. Thus, the quarterly growth rate ended at 1.9 per cent in the 4th quarter.

Though infection control measures were tightened, they were not as far-reaching in December as had been the case in March. Schools and kindergartens were still open, restrictions for the service industry were lesser and access to foreign labor was somewhat better than during the spring.

There may be parts of the economy that were better equipped to adapt to the strict measures at the end of the year, compared to last spring.

- Probably just as important was the fact that the industries hardest hit by the infection control measures were already at low activity levels. Thus, the additional downturn did not have as strong an effect on GDP as in March, he says.

Mixed development in the service industries

There were significant differences regarding how hard the infection control measures hit service industries towards the end of the year. In the 4th quarter accommodation and food service activities fell by 16 per cent from last quarter. There was also a downturn for arts, entertainment and other service activities as well as transport activities excluding ocean transport, which fell by around 4 and 1 per cent in the 4th quarter.

Unlike the other hard-hit service industries, administrative and support service activities fell in the 3rd quarter. Low activity levels last quarter resulted in very strong growth for the industry in the 4th quarter, at over 20 per cent. Wholesale also had a positive development in the 4th quarter, growing at a rate near 3,5 per cent.

The 4th quarter ended with strong, seasonally adjusted growth for the manufacturing industries, at a rate of 3.3 per cent. There was broadly based but diminishing growth throughout every month in the quarter. The industries related to oil contributed most to the quarterly growth and increased by almost 6 per cent compared with the previous quarter.

Oil and gas extraction increased production volumes by more than 3 per cent in the 4th quarter. Throughout the months in the 4th quarter, 58.3 million standard cubic meters of oil equivalents (MSm3 o.e.) was produced, which is around 0.8 per cent less than levels in the 4th quarter in 2019.

Total GDP in Norway, including oil and gas extraction, pipeline transportation and ocean transport grew 1.4 per cent from November to December. The 4th quarter in sum saw a total GDP growth of 0.6 per cent.

Unchanged household consumption

Household consumption was unchanged from November to December, which gave a total decrease of 0.1 per cent for the 4th quarter in sum. Consumption of goods fell by 1.1 per cent in December and grew by 0.7 in the 4th quarter. After a significant increase of 12.3 per cent in the 3rd quarter, consumption of services grew 0.6 per cent in the 4th quarter. In sum, household consumption fell by 7.4 per cent from 2019 to 2020.

Consumption in central government rose by 2.4 per cent in the 4th quarter following an increase of 3 per cent in the 3rd quarter. Continued recovery within the health industry accounts for most of the growth in the 4th quarter. Social work activities contributed to the growth in consumption.

Investments increased in the 4th quarter

In the 4th quarter gross fixed capital formation grew by 0.9 per cent following an estimated decrease of 0.8 per cent the previous quarter. In sum, gross fixed capital formation is estimated to have decreased by 3.9 per cent from 2019 to 2020. Dwelling services grew by 4.7 per cent in the 4th quarter after a 1.2 per cent decrease in the 3rd quarter. The annual downturn from 2019 is estimated to 4 per cent.

For gross fixed capital formation there is generally weak access to sound monthly information. For petroleum investments, investments in manufacturing, mining and power supply, information on planned investments as reported by the companies has been used.

Exports and imports

Both exports and imports of traditional goods fell in the beginning of the pandemic, but the recovery has been significant. Exports of traditional goods grew a further 6.5 per cent in December. Refined oil products were the most significant single contribution to monthly growth. With the strong monthly growth in December, quarterly growth ended at 3.9 per cent for the 4th quarter. There was, however, a significant monthly decrease in imports of traditional goods, at 7.6. Manufactured goods were the primary contribution to the downturn. Positive developments the last two months still led to a quarterly growth rate of 1.8 per cent in sum for the 4th quarter. From 2019 to 2020 the annual decrease in exports and imports of services was 2.3 and 2.5 per cent respectively.

Trade in services fell significantly at the start of the Covid-19 pandemic and has, unlike trade in goods, not fully recovered. In the 4th quarter, imports of services decreased by 2.1 per cent. The annual downturn is estimated at 29.3 per cent from 2019. Exports of services, however, saw a 2.9 per cent increase in the 4th quarter and an estimated annual decrease of 13.3 per cent. The decline in trade in services since March is particularly caused by a downturn in transport services due restrictions on foreign travel. Transport services are, however, a smaller portion of Norwegian service exports than imports. There is less available information on trade in services on a monthly basis, thus, monthly figures are less certain.

With few exceptions oil exports have had a positive development throughout 2020, with a total annual growth rate estimated at 9.5 per cent from 2019. In December 2020 the positive growth picture continued with a growth rate of 6.2 per cent for crude oil and natural gas exports. Quarterly growth for the 4th quarter ended up at 0.5 per cent.

Total exports grew 5 per cent in December and 1.8 per cent in the 4th quarter. Total imports fell 5.9 per cent monthly and grew 0.3 per cent quarterly. From 2019 to 2020, the annual decrease in total exports was 0.9 per cent, while the annual decrease was 12.2 per cent for total imports. Thus, the Norwegian balance of trade in goods and services was strengthened, measured in fixed prices.

Moderate growth in employment in Q4

Total employment rose by 0.7 per cent in the 4th quarter, adjusted for regular seasonal variations. For 2020, however, employment fell by 1.3 per cent from 2019.

Revisjoner

In connection with new monthly figures, there will be revisions. The statistical sources used will usually not be changed for previous months, but seasonally adjusted series can still be affected. This is caused by the basis for the seasonal adjustments changing when data for new periods are added.

In the current situation, the uncertainty is greater than normal. Revisions are therefor to be expected, also due to potential changes in the underlying data for previously published months.

In some areas, new statistical sources have been incorporated for previous months. With the publication of figures for December 2020, the macroeconomic picture remains unchanged.