UPDATE 1-Norway's economy set to shrink by 1% in 2020 amid virus outbreak

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By Terje Solsvik

OSLO, March 20 (Reuters) – The Norwegian economy could shrink by 1% in 2020 due to the coronavirus outbreak, even as massive economic stimulus is pumped into companies and households, the government predicted on Friday.

In its original budget, released late last year, the finance ministry had predicted growth of 2.5%.

The government has proposed a range of measures to mitigate the crisis, amounting to some 280 billion crowns ($25.71 billion) in the form of spending, loans to companies and deferred tax payments, it said.

“These measures will help viable firms through this difficult time, so that people still have jobs when the crisis is over,” Prime Minister Erna Solberg said in a statement.

The new forecasts were highly uncertain however, the government said, and the finance ministry has not yet calculated its traditional budget indicators, such as the percentage of spending from the country’s oil fund.

But the so-called non-oil fiscal budget balance will weaken by a whopping 111 billion Norwegian crowns ($10.16 billion) as spending is ramped up and government income drops, according to the new forecasts.

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