According to statistics Norway, GDP increased 0.1% in Q1 of 2010 for mainland Norway. Production fell in parts of manufacturing, with a marked drop in construction having a major impact. That said, wholesale and retail industries grew for the fourth consecutive quarter, as household consumption remained stable. Unemployment has increased 0.1%, but - at 3.5% - this is still low compared to other countries.
After the record high level of bankruptcies in 2009, the trend has reversed in 2010. According to Statistics Norway, the number of bankruptcies was 1,211 in Q1 of 2010: a 15% decrease year-on-year. Of these, 865 were related to business failures, excluding sole proprietorships, with one in three of these in the wholesale and retail trade sectors. In the group of sole proprietorships/personal bankruptcies, more than a third related to the construction sector.
Overall, Crédito y Caución expects insolvencies to decrease 10% in 2010. That said, for construction and related business, Crédito y Caución still expects a high number of bankruptcies in the coming months. The industry suffered from adverse weather conditions last winter and, despite improvements in orders since then, for many small and medium sized companies this has come too late. On the other hand, there are larger projects that have not yet started, some of them out of the governmental support programme, but larger companies will be the major beneficiaries of these, as they were in 2009 and early 2010.
In April 2010, the Expected Default Frequency [EDF] indicator in Norway stood at 75 basis points: 244 points lower than at its peak in March 2009. That said, it was still 50 basis points higher than in June 2008, before the credit crisis took hold.
Sectors hit by the crisis show signs of improvement
The shipbuilding sector entered the economic crisis with full order books, but order cancellations and a lack of new business changed all that. Responding to increasing pressure, at the end of April the government decided on a new support package, with increased guarantee capacity, extended loan facilities, new public orders and other subsidies. Paper is still struggling with overcapacities and price pressures worldwide. Having seen a severe price reduction and a record high number of bankruptcies in 2009, the metal sector seems to be getting back on track, with major players possibly presenting first quarter 2010 figures ahead of budget and analysts´ expectations. The important salmon sector continues to profit from the salmon virus epidemic in Chile.
The International Monetary Fund forecasts GDP growth of 1.1% in 2010, after a decline of 1.6% last year, as the sectors hit by the crisis show signs of improvement. The future development of oil prices and the Norwegian crown exchange rate are hard to predict because of new uncertainties in the wake of the euro crisis, but will play an important part in Norways economic performance in the coming months.
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