Growth expected to cool in 2021 – E24

But even though growth should rebound next year, the crown crisis is likely to hurt value creation in the coming years, the government believes.

It appears in the annual budget update for the current year, revised budget.

The government says it expects growth of between four and seven percent in the continental economy (continental GDP) in 2021.

The government estimates a slowdown in the continental economy of four percent this year, but says the drop could be as much as eight percent in a bleaker scenario.

See the table of key figures in the budget at the bottom of the case.

The estimate of a “fair” four percent decline in the economy is based on a technical assumption that the acute phase lasts for three months and that the Norwegian economy is recovering “fairly quickly,” according to the revised budget.

– The time ahead will be demanding, says Prime Minister Erna Solberg.

– Many Norwegians do not have a job, most because they are fired. Even more people are not sure if their job or their job for life is still there when the crisis is over. That is why we present several measures of competition and ecological restructuring for the future. We will create more jobs and include even more in the world of work, he adds.

Expecting worse recession

The government had previously predicted that growth would fall two percent in 2020.

– The downward adjustment should be seen in the context of the situation that is likely to last longer and hit harder than previously assumed, while the outlook for our trading partners has shrunk, writes the Ministry of Finance.

These are uncertain times and it is difficult to estimate when economic growth will rebound again, the government notes in the Revised National Budget.

– The long-term consequences will depend on the size and duration of the economic setback, the government writes.

Large gaps in projections

The estimate for government growth in 2021 varies from four percent in the scenario where the decline is greatest and the recovery takes the longest, to seven percent in the most optimistic scenario of the government.

The crown crisis will also dampen value creation in Norway over time, according to the updated budget.

– The level of value creation in 2024 has dropped by half to four percent as a result of the crisis, the government writes.

– The first report of the expert group led by Steinar Holden indicates that production capacity in 2024 as a result of various infection control strategies may be 1-4% less than if the coronavirus outbreak had not occurred. Both rising unemployment and reducing investment can reduce long-term production potential, the government writes.

The crisis continues for 1-2 years

In a revised budget, the government notes that Norwegians must be prepared to live with the infection and infection prevention measures for one to two years.

“In some industries and companies, mainly in the service sector, it will require investments and adjustments that will increase costs and reduce production,” the government writes.

– Demand from the transportation and tourism industry may also be lower as people travel less as a precaution or go on vacation in new ways. The home office period has introduced various digital meeting places as alternatives to physical meetings, the government writes.

At the same time, the crisis may open up new opportunities for some companies, which may experience increased demand.

“Such adjustments can take time, and inequalities between the skills of the unemployed and the needy can lead to mismatches in the labor market and higher unemployment over a period of time,” the government writes.