Norway’s quarterly GDP shrinks

Bloomberg

Norway’s economy contracted as expected at the beginning of the year, while a rebound after removal of virus-related measures bolstered the outlook for quarterly interest rate hikes by Norges Bank.
Mainland gross domestic product, which adjusts for the nation’s offshore industry, shrank 0.6 percent in the first quarter from the previous three months, dented by the last pandemic wave, the statistics office said. This was in line with economists’ projections in a Bloomberg survey, while the central bank had forecast a 0.4% decline.
A spike in global energy prices spurred by the war in Ukraine has benefited the economy of the fossil-fuel rich Nordic country and it now faces growing labour shortages and wage pressure. That’s prompted speculation that Norges Bank — the first among the G10 nations with major currencies to begin stimulus removal last year — will speed up its interest rate-hike plan to more than one increase per quarter.
“The situation in the Norwegian economy – here and now, is at least as good as the central bank has seen,” Svenska Handelsbanken’s economist Marius Gonsholt Hov said in a note to clients, pointing to “solid” growth in February and March after society reopened. “Thus, it is clear that the next interest rate hike will come in June.”
Norway’s economic activity looks set to rise further from “a very high level,” with unemployment now lower than before the pandemic, Nordea’s analysts said earlier this week. They cited a drive by European countries to replace imports of Russian energy that would underpin growth in Norwegian oil investment and the wider economy.
The finance ministry on Thursday reiterated the need to prevent overheating in the Norwegian economy as it raised the wealth tax and cut a sales tax exemption on electric vehicles, seeking to reduce spending from its wealth fund, the world’s largest.