OSLO – Norway’s economy remains strong despite sharply lower oil prices, Norway’s largest export, but it is too early to say what the full impact of cheaper crude and coronavirus will be, Minister Minister said on Monday of Finance, Jan Tore Sanner.
The Norwegian currency weakened to an all-time low against the euro at the start of the session, down 5.3% while the country’s benchmark stock index plunged 12%, twice the average. European stocks, data from Refinitiv showed.
Almost a fifth of Norway’s annual gross domestic product comes from oil and natural gas.
“The Norwegian economy is strong and we have experience in dealing with oil price fluctuations,” Sanner told Reuters in an emailed statement.
Oil prices fell 34% on Monday as Saudi Arabia launched a price war and headed for the biggest one-day drop in 29 years. [nL1N2B10DB]
While falling oil prices will cut government revenues, Norway can tap into its billion-dollar sovereign wealth fund, the world’s largest, with assets worth about seven years of budget spending.
The Norwegian central bank is expected to cut interest rates by at least 25 basis points in a policy announcement scheduled for March 19, said Nordea Markets, changing its view that Norges Bank would remain on hold despite the coronavirus epidemic.
“The outlook has changed – both in terms of the potential magnitude of the negative side effects of the coronavirus and the development of oil prices and financial markets over the past week,” wrote the chief economist. from Nordea, Kjetil Olsen.
The central bank did not immediately respond to a request for comment.
When oil prices plunged for the last time in 2014-2015, oil companies like Equinor sharply cut their investment and operating expenses, causing Norwegian unemployment to rise.
“The oil companies are better prepared to handle this than in 2015,” said Sanner of the drop in the price of crude oil.
Equinor’s shares fell 16% while those of Aker BP, jointly owned by the Norwegian Aker and the British BP Plc, fell by 24%.
DNB, the largest Norwegian bank and a major lender to companies that serve the petroleum industry, fell 29% at the start of the session before recovering in part to fall 13% at 08:58 GMT, while European banks decreased on average by 10%.
The euro cost 10.9940 crowns at 07:53 GMT, far surpassing a previous record of 10.5025 set on Friday, according to Refinitiv data.
(Edited by Catherine Evans)