Strong resurgence in the Norwegian economy in 2021

The year 2021 was driven by a resurgence of economic activity after the recession in 2020. The activity reflected the reopening of society and was especially driven by the service industries. There was a steep growth, and GDP for mainland Norway increased by 5.9 per cent from March to November of 2021.

- At the beginning and end of the year, the infection rates were high and infection control measures were put in place, but the economic consequences were less extensive in 2021 than in 2020. In April of 2021, the gradual reopening of society began, and activity in the mainland economy grew each month from April to November, says Head of National Accounts, Pål Sletten.

The service industries have been the great drivers behind the upturns and downturns during the pandemic. Industries that have been barely affected by the pandemic, have also contributed to the growth.

Throughout the pandemic, an image has formed of a dual economy. Service industries heavily affected by social distancing industries with a large foreign workforce, as well as tourism and cultural activities were especially affected by the pandemic. Wholesale and retail trade on the other hand increased due to a change in household consumption pattern and closed borders. Non-cyclical industries such as traditional fishing and electricity production have also done well during the pandemic and contributed to the growth in the mainland economy.

High gas prices lead to high increase in nominal GDP

Throughout 2020 and 2021 there has at times been high prices on different raw materials and international freight rates. The price on energy has increased, and for Norway the enormous growth in gas prices has been especially important.

Total GDP, including oil and gas extraction, pipeline transport and foreign shipping, increased by 21.5 per cent from 2020 to 2021 measured in current prices.

‒ In 2021, we had the largest growth in GDP in many decades, higher than under the oil price shock in the 1970s, says Pål Sletten.

This is mainly attributed to the enormous price increase in oil and gas. The value of oil and gas exports increased by over 500 billion kroners from 2020 to 2021, to a historical high level. Norway’s trade balance and trade surplus were significantly strengthened.

In 2021, international price growth on energy resulted in higher electricity prices. This lead to a considerable increase in electricity costs for households and businesses.

National accounts for the fourth quarter and December 2021

At the beginning of December, the first case of Omicron was discovered in Norway. To reduce the burden on the healthcare system from the incredibly contagious variant of the corona virus, new infection control measures were introduced. As a result, the economic activity in the mainland economy decreased 0.4 per cent in December. The decline was especially driven by accommodation and food services. In the fourth quarter, GDP in the mainland economy still grew 1.4 per cent.

-New restriction were put in place in December which lasted until January. This affects the economic development at the turn of the year. Society has reopened and the conditions for further normalization are thus present, says Pål Sletten.

In the fourth quarter, total GDP for Norway increased by 8.1 per cent measured in current prices. Most of the growth is attributed to the increase in oil and gas prices. Petroleum activities increased 22.7 per cent from the third to the fourth quarter, measured in current prices. The value of Norwegian exports of oil and gas more than doubled in the fourth quarter of 2021 compared to the same quarter of 2020. Thus, the trade balance reached historically high levels, 257 billion kroners in the fourth quarter.

Strong increase in the service industries

The activity in the service industries, including dwelling services, increased 2.8 per cent in the fourth quarter. Administrative and support service activities was the largest contributor, and the activity in this industry was about the same level as before the pandemic. New restrictions at the end of the year affected vulnerable industries. Activity in transport, accommodation and food services decreased in December.

Manufacturing decreased 0.9 per cent in the fourth quarter, and manufacturing of food products contributed the most to the decline. This is mainly due to an unusually strong third quarter, driven by processing of fish. Refined petroleum products also decreased in the fourth quarter.

The industry aggregate other goods production, which includes the primary industries, electricity production and construction, fell 1 per cent in the fourth quarter. Fishing and aquaculture were the largest contributors to the decline. This is mainly due to the mackerel being fished last quarter. The activity increased in construction and dampened the fall. This industry was affected by a labor shortage due to the travel restrictions earlier in the year, but the activity increased in the third and fourth quarter.

Gross product in general government increased 0.7 per cent in the fourth quarter. The activity increased by 1.3 per cent in central government and was mainly due to increased public administration and education. Lower activity at the hospitals dampened the increase. In local government, the activity increased by 0.2 per cent, due to education and cultural activities. Care services and kindergartens decreased on the other hand.

Petroleum activities and ocean transport decreased 7.1 per cent in the fourth quarter measured in fixed prices. In current prices, it increased by 22.7 per cent, which is mostly due to an enormous price increase on oil and gas.

Consumption

Household consumption declined 2.9 per cent from November to December. Despite this, consumption still increased 3.1 per cent in the fourth quarter. Consumption of goods fell 0.5 per cent in the fourth quarter, mostly due to a decline in food and beverages. Services consumption increased 5.2 per cent in the fourth quarter. Cultural and passenger transport were the largest contributors to the growth. Total household consumption increased 4.8 per cent from 2020 to 2021.

Final consumption expenditure of central government increased 0.5 per cent in the fourth quarter, while in the local government it decreased by 0.2 per cent. In total, consumption expenditure of general government increased by 3.9 per cent in 2021.

Investments

Gross investments for mainland Norway increased by 4.2 per cent in the fourth quarter. Investments in general government contributed the most to the growth and increased by 5.8 per cent. After a decline of 6.1 per cent in the third quarter, investments in dwellings increased by 4.3 per cent. Manufacturing and mining, and other services also contributed to the increase. In total, gross investments decreased 0.3 per cent from 2020 to 2021.

Exports and imports

Both exports and imports of goods increased in 2021, which gave the largest trade surplus in 2021. Exports increased by 1 per cent in December measured in fixed prices, due to an increase in exports of oil and gas. Exports of services, traditional goods, ships, oil platforms and aircrafts decreased. In the fourth quarter, exports decreased by 2.6 per cent measured in fixed prices. Exports of goods fell 5.4 per cent and was driven by a decrease in exports of ships, oil platforms and aircrafts. Exports of electricity dampened the decrease and increased by almost 40 per cent in the fourth quarter. Exports of services also contributed positively and increased by 5.5 per cent.

Measured in current prices, there was a solid growth in exports of oil and gas. Compared to the fourth quarter of 2020, exports increased by 227 per cent. Increased demand and reduced supply resulted in extraordinary high gas prices in Europe, especially in the last half of 2021.

Total imports decreased 6 per cent in December, driven by a decrease in imports of traditional goods and services. Three F-35 fighter aircrafts were delivered in December, which counteracted the decrease in imports that month. In the fourth quarter, imports increased by 1.1 per cent in total. Imports of services increased in the fourth quarter, mainly due to an increase in travel due to easing of travel restrictions. Despite the increase in the past two quarters, imports of services were still lower than before the pandemic. Imports of traditional goods decreased 3.1 per cent in the fourth quarter. Manufacturing of metals and machinery and other equipment contributed especially to the decline this quarter.

Employment

Employment in the fourth quarter increased by 1.4 per cent, adjusted for normal seasonal variation. Administration and support services, and accommodation and food services contributed the most to the increase. The number of non-residential wage earners was significantly lower in the fourth quarter compared to the same quarter in 2019. Preliminary figures show an increase of 1.2 per cent in total employment in 2021.

Revisions

In connection with new monthly figures, there will be revisions. The statistics used will not normally change for previous months. Seasonally adjusted series can, however, be affected, since the basis for the seasonal adjustment changes when new periods are added. The National Accounts has published an article on the revisions in the monthly national accounts.