Norway's central bank cut rates to a record 1.0 percent as the world economy continues to deal with lower oil prices. Norway's economy has been struck with rising levels of unemployment and waning consumer confidence, forcing the country's central bank to consider further easing measures in the coming months.
Norway is an oil-driven economy that depends on high oil prices to garner economic prosperity. Oil and gas companies contribute one-fifth to Norway's economy, but the shift in oil prices has forced many firms to lay off workers, with many investors withdrawing funds. Investment funds are expected to fall 15 percent this year and 5.0 percent the following year. Overall, investments are expected to be 18 percent lower than the previous year. However, an increase of 1.4 percent within the energy sector is expected for 2016, due to exploration and development. Money for onshore development, ongoing projects and pipeline transportation are all expected to fall, but offshore activity will gain momentum.
State-controlled Statoil is expected to cut 2,000 workers this week, and the firm plans to reduce its workforce by seven percent by 2016. Vital supplier National Oilwell Varco expects to cut 1,500 jobs around the country. Over 20,000 jobs have been lost in the energy sector since early 2014. Even though oil prices have surged, they are still 40 percent less compared to last year, and low prices are beginning to have a domino effect. The slump in oil prices means that Norway's GDP will only go up to 1.2 percent in 2015, according to the Norway Post. To make matters worse, Norway is faced with an oil worker strike next week that could decrease oil production, unless wage negotiations are settled.
In other sectors of the economy, Norwegian unemployment stands at 4.1 percent, its highest level in a decade, rising from 3.2 percent in 2014. Inflation remains below central bank targets, including wage increases. Norway's trade surplus increased, with imports dropping and exports gaining momentum in May.
Exports surged 2.8 percent month-on-month, and imports fell 29 percent. Exports fell 5.5 percent year-on-year, while imports dropped 0.9 percent. Statistics Norway believes that an upswing in exports will occur in early 2016. Higher exports combined with spikes in business investment and housing demand will give Norway the necessary boost going forward despite the threat of lower oil prices. Even though sluggishness will continue throughout 2017, Norway will see a 3.2-percent increase in GDP in 2017. Norway's heavy oil investments make the economy prone to turbulence, but the nation continues to excel economically. The average Norwegian worker makes more than many other workers around the world, and the country is notable for its above-average standard of living, according to UN data.