Norway’s economy accelerated last quarter to its fastest pace in almost two years, backing expectations that the nation’s central bank will begin easing borrowing costs in the first quarter.

Mainland gross domestic product (GDP), which excludes Norway’s offshore energy industry, grew 0.5% from the previous three months, the most since the fourth quarter of 2022. The data published by the statistics office on Thursday included revisions to previous periods. The gain exceeds the 0.3% increase forecast by analysts in a Bloomberg survey and by Norges Bank.

The data paints a brighter picture for western Europe’s largest fossil-fuel exporter since the start of this year, suggesting the low point in the economy remained in 2023. The sectors benefitting from robust demand for oil and gas have helped offset the dent from credit costs at a 16-year high burdening spending and investment. 

The outcome is still likely to cement the outlook for Norway’s key rate to remain on hold until March.

“The national account data indicate that the economy has been resilient and adapted to the higher interest rates reasonably well,” DNB Bank ASA’s senior economist Kyrre Aamdal said in a note. “Today’s data suggests that there is no immediate need for easing monetary policy.”

His colleagues at Svenska Handelsbanken AB said the data suggests productivity has returned back to trend growth and costs are growing at a slower pace. 

“We see that price growth in value creation in Norway has continued to decline,” they wrote in a note to clients. “This is good news, in a situation where growth in the economy has also been stronger than expected.”

Several manufacturing sectors, including oil refining, chemicals and pharmaceuticals drove the expansion, while growth in mackerel fishing also contributed, the office said. Household consumption was little changed, it added, mainly due to lower car purchases.

The kroner was little changed after the report, trading 0.1% higher at 11.6495 versus the euro at 9.36am in Oslo. The currency has recently erased some losses but remains among the worst-performing G10 currencies this year.

Revisions to mainland economy included a cut to full-year growth last year, now seen at 0.6% versus 0.7%, while 2022 expansion was lifted to 4.3% from 3.7%.

The development also underscores divergent trends in the region. The output of Denmark and Finland similarly extended recent gains, but Sweden stands in contrast. The largest economy in the Nordic region unexpectedly continued to contract in the quarter, according to preliminary data.

  - Bloomberg