April 29, 2020 / 8:34 AM / a month ago

UPDATE 1-Most Norway firms affected by COVID-19, slow recovery seen by many

(Adds finance minister, detail, background)

By Terje Solsvik

OSLO, April 29 (Reuters) - The COVID-19 outbreak and efforts to contain it have affected most Norwegian companies, and around 40% expect their markets to normalise in 2021 at the earliest, a central bank business survey showed on Wednesday.

The input from 81 firms, collected on April 21-22, provides crucial information to Norges Bank ahead of its monetary policy meeting scheduled for May 7.

In March, Norges Bank made two unscheduled rate cuts, bringing the cost of borrowing down to a record low 0.25% from 1.5% as part of monetary and fiscal efforts to soften the economic blow from lockdowns and social distancing rules.

While the reopening of kindergartens had made work easier for some employees, companies had so far seen few other effects from the gradual easing of containment measures, the central bank survey showed.

Some 30% of firms expect activity to return to pre-virus levels by the end of 2020, while the remaining 30% were either little affected or expect that the situation will return to normal in the next few months, Norges Bank said.

In late May or early June, the government will present a roadmap for economic recovery, it said on Tuesday.

“This is the biggest peace-time shock to hit the Norwegian economy,” Finance Minister Jan Tore Sanner told a conference earlier on Wednesday.

Handelsbanken predicted the double hit to Norway economy from COVID-19 and the plunge in oil will cause a deep recession followed by a slow recovery, and that interest rates will be cut to zero and stay at that level for an extended period. (Reporting by Terje Solsvik, editing by Gwladys Fouche)

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