Norway's economy expected to experience upturn from early next year

The standstill in the second half of last year has been replaced by a weak increase in growth in Norway's mainland economy this year and an upturn in the economy might take place from early next year, the country's statistics bureau said on Thursday.

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, Statistics Norway said in its latest report on economic trends for the country and abroad.

Oil prices have risen significantly from very low levels early in 2016, but the negative impulses from the petroleum sector continue to dominate, it said, adding that 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.

However, 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, according to the report.

"Our calculations suggest that unemployment has peaked, but will only see a slight fall over the next few years," it said.

Two years of an economic downturn have pushed up unemployment by 1.5 percentage points to 4.8 percent, as measured by the Labour Force Survey (LFS). Most of the rise in unemployment took place in the early stages of the downturn, and the increase this year has so far only been 0.2 percentage points.

"Economic growth has picked up throughout this year, and from early 2017 we expect mainland Norway's GDP to increase more than trend growth, which is estimated at approximately 2 percent," the report said. Endit