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Norway’s quarterly GDP contraction doesn’t dampen rate outlook

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(Bloomberg) – Norway’s economy contracted as expected at the start of the year, while a rebound from the removal of virus-related measures bolstered the outlook for quarterly interest rate hikes by Norges Bank .

The mainland’s gross domestic product, which adjusts for the country’s offshore industry, fell 0.6 percent in the first quarter from the previous three months, shaken by the latest pandemic wave, the bureau said on Friday. statistics. This was in line with projections by economists in a Bloomberg survey, when the central bank had forecast a decline of 0.4%.

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A spike in world energy prices spurred by war in Ukraine has benefited the economy of the fossil-fuel-rich Nordic country and it now faces growing labor shortages and wage pressure. It has prompted speculation that Norges Bank – the first of the G10 nations with major currencies to start removing stimulus last year – will accelerate its interest rate hike plan to more than one increase per quarter.

“The situation of the Norwegian economy – here and now, is at least as good as the central bank has seen it,” Svenska Handelsbanken economist Marius Gonsholt Hov said in a note to clients, highlighting “solid” growth. in February and March after the company reopened. “Thus, it is clear that the next interest rate hike will take place in June.”

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Read more: Norwegian inflation at 13-year high increases pressure to hike rates

Norway’s economic activity is expected to rise further from a “very high level”, with unemployment now lower than before the pandemic, Nordea analysts said earlier this week. They cited a willingness by European countries to substitute Russian energy imports that would support the growth of Norwegian oil investment and the wider economy.

The Ministry of Finance on Thursday reiterated the need to prevent Norway’s economy from overheating by raising wealth tax and scrapping a sales tax exemption on electric vehicles, seeking to cut spending on its fund. fortune, the largest in the world.

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