Norway Economic Outlook September 1, 2020 The economy contracted at a record pace in Q2, with the full effect of lockdown measures imposed in mid-March hitting activity hard. The domestic economy led the downturn amid tumbling household spending and faltering fixed investment. Growth in the external sector softened the overall result somewhat, although this was chiefly driven by a sharp drop in imports, likely reflecting subdued domestic demand. However, the quarterly result suggested an uptick in activity toward the end of the quarter, with monthly GDP in June posting a marked expansion as consumer spending returned: Retail sales in June grew 14%, the fastest rate in over three decades. Turning to Q3, the easing of lockdown measures and a relatively low rate of domestic Covid-19 cases bode well for a continued recovery, with high-frequency data for July and August indicating retail activity has returned to pre-pandemic levels. The economy contracted at a record pace in Q2, with the full effect of lockdown measures imposed in mid-March hitting activity hard. The domestic economy led the downturn amid tumbling household spending and faltering fixed investment. Growth in the external sector softened the overall result somewhat, although this was chiefly driven by a sharp drop in imports, likely reflecting subdued domestic demand. However, the quarterly result suggested an uptick in activity toward the end of the quarter, with monthly GDP in June posting a marked expansion as consumer spending returned: Retail sales in June grew 14%, the fastest rate in over three decades. Turning to Q3, the easing of lockdown measures and a relatively low rate of domestic Covid-19 cases bode well for a continued recovery, with high-frequency data for July and August indicating retail activity has returned to pre-pandemic levels.

Norway Economic Growth The economy is set to contract this year due to diminished household spending and fixed investment amid heightened uncertainty. However, a boost in government spending should temper the downturn somewhat. The prolonged nature of the pandemic and its impact on key external markets continue to weigh on the outlook. FocusEconomics Consensus Forecast panelists estimate total GDP contracting 4.8% in 2020, which is down 0.1 percentage points from last month’s forecast, before expanding 3.6% in 2021. Furthermore, our panelists see mainland GDP contracting 4.1% in 2020, which is up 0.4 percentage points from last month’s projection, before increasing 3.9% in 2021.