The standstill in the second half of last year has been replaced by a weak increase in growth in the Norwegian mainland economy this year, Statistics Norway (SSB) reports.
SSB believes that a reduced decline in oil investments coupled with growth in house-building activity and exports may lead to an upturn in the economy from early next year, assuming no further reduction in interest rates.
Oil prices have risen significantly from very low levels early in 2016, but the negative impulses from the petroleum sector continue to dominate. The fall in oil prices that began in summer 2014 has exacerbated the downturn in petroleum industry investments, which had already begun before the end of 2013. The downturn that followed may now be coming to an end, according to SSB. A weaker krone, low interest rate levels and an expansionary fiscal policy have counteracted the effects of the fall in demand from the Norwegian and international petroleum industries. SSB's calculations suggest that unemployment has peaked, but that we will only see a slight fall over the next few years.
So far this year, the investments in the Norwegian petroleum industry have fallen by 34 per cent from the peak in 2013, SSB writes. The downturn in the 2nd quarter of this year was 3.7 per cent, which followed a fall in the preceding four quarters of over 5 per cent on average.
- In our calculations, we assume that oil prices will gradually increase from just under USD 50 per barrel in the first half of September to USD 60 per barrel by the end of 2019. Cost cuts in the wake of the drop in oil prices mean in isolation that several field developments will be profitable. Several developments will stimulate demand from the industry, while cost savings in isolation will reduce demand. We assume that the decline in petroleum investments in terms of volume will be curbed considerably in 2017, and that the volume of investment will increase slightly in 2018 and 2019, SSB concludes.