Norwegian economy has shrunk by 0.2 percent

The Norwegian economy has shrank less than expected in the fourth quarter, receding by just 0.2 percent for the non-oil economy, although the latest figure does indicate that both the domestic an foreign demand is falling foul of the credit crunch.

The mainland economy, which excludes shipping and oil, has seen increased activity in general government, which has compensated against further shrinking of the economy, as non-oil gross domestic product increased by 2.4 percent in 2008, although slowing from 6.1 percent in the previous year.

The Norwegian statistics agency has also cut its 2009-11 GDP forecasts on the publication of the latest data.

As unemployment increased, the mainland economy is predicted to shrink by a further 1.7 percent due to the reduction in consumer consumption.

It has been over 20 years since the world’s fifth largest oil exporter experienced a contraction, although since the results were better than expected, the kroner gained 1.4 percent against the euro.

Norway’s central bank lowered its interest rates by half a percentage point to 2.5 percent this month, and there has also been a government injection of 100 billion kroner (£10.2 billion) to protect the banks and help to revive the economy.

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