Norway’s Economic Growth Surprise Fans Rate-Hike Bets
(Bloomberg) -- Norway’s economy grew much faster than expected at the end of last year, underpinning bets that its central bank will be the first in the rich world to raise interest rates this year.
Mainland gross domestic product, which adjusts for Norway’s offshore industry, expanded 1.9% in the fourth quarter, the statistics office said on Friday. Economists surveyed by Bloomberg had expected a 1.3% growth rate.
The figures leave the oil-rich economy 1.4% smaller than its pre-pandemic level, according to Bloomberg Economics, a much milder hit than most of the world’s advanced nations. Such resilience, thanks largely to Norway’s reliance on its $1.3 trillion wealth fund for fiscal support, has prompted analysts to predict that the central bank will be able to raise rates years before others.
For all of 2020, Norway’s mainland economy contracted 2.5%, much less than the 3.5% decline the central bank had predicted.
“The mainland growth data indicate that the economy has managed the pandemic better than expected,” Kyrre Aamdal, senior economist at DNB Markets in Oslo, said in a report. “The figures support the view of an earlier rate hike than Norges Bank has suggested.”
The central bank’s forecast is for borrowing costs to increase in early 2022. But analysts and investors are bracing for an earlier move, given the latest data and the pace of Norway’s vaccine rollout.
What Bloomberg Economics Say...
“The reading confirms the Nordic country took a lesser hit from the pandemic than most. It also means Norway is facing new headwinds from a stronger level of activity than expected by the central bank. This will add to reasons for Norges Bank to lift rates in December this year.”
-- Johanna Jeansson, economist. For the full note, click here.
Industries related to oil contributed most to growth in the fourth quarter, with an increase of almost 6% from the previous three months, the statistics office said. Expansion in December was mainly boosted by energy production and aquaculture.
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