Q1 2020: Greater uncertainty due to COVID-19 and drop in price of oil

Export Credit disbursed NOK 3.2 billion in loans in the first quarter of 2020, considerably more than in the same quarter in the previous year (NOK 1.2 billion). 79 per cent of these disbursements went to shipping, cruise ships, special ships and financing of cleaning technologies for ships constituting the majority in terms of both numbers and value.

At the end of the first quarter of 2020, Export Credit had a lending balance of NOK 72.2 billion, significantly higher than in the first quarter of 2019 (NOK 59.9 billion), due primarily to exchange rate fluctuations. Of the total lending balance, loans to shipping amount to 68.6 per cent, energy and industry 27.2 per cent and aquaculture and fisheries projects 4.2 per cent.

For the Norwegian economy, however, the end of the quarter was characterised by a severe drop in the price of oil and the introduction of strict infection control measures, leading to a very difficult situation for large parts of the Norwegian economy. Many companies are experiencing both a drop in revenue and major uncertainty in respect of the future. The Norwegian export industry is also severely affected. In industry and energy, investment decisions for new oilfield development projects have been postponed indefinitely, making it challenging for Norwegian shipyards and equipment suppliers to win new export contracts. The Norwegian Shipowners’ Association has reported reduced turnover in all shipping segments, along with a trebling of ships in circulation as a consequence of the coronavirus pandemic. Norwegian Shipowners’ Association members emphasise that access to capital has worsened, and low construction activity is anticipated in shipping in 2020.

“This is a description of reality that many of our customers recognise. Export companies have been struck by two tsunamis simultaneously - both the massive drop in the price of oil and the effects of the strict infection control measures,” says Otto Søberg, CEO of Export Credit Norway.

Menon Economics has worked on behalf of Export Credit to calculate the impact of the coronavirus crisis and the drop in the price of oil for the export industries, except for oil and gas. The report estimates that up to 55,000 jobs in the most important export trades are at risk of being lost by the end of 2020. The maritime industry and oil service industry are particularly vulnerable. Loss of these jobs will impact counties in western Norway in particular. 20,000 export jobs may be lost here, according to Menon.

“Export Credit is particularly concerned about the overall value chains and the ecosystems in Norwegian export-oriented trade and industry. If these are reduced to a considerable extent, we will be at risk of losing both skills and key suppliers of technology and solutions that are necessary for establishing future new industries,” says Søberg.

“We are now doing our utmost at Export Credit to assist export companies as effectively as possible with this difficult situation. We are maintaining close contact with export-oriented trade and industry, banks and industry organisations. Measures are being assessed continuously in consultation with loan guarantors in order to ease liquidity challenges by deferring payment of instalments for our borrowers,” says Søberg.

The Norwegian government has launched a number of packages of measures for the Norwegian business sector.

“Export Credit Norway is in discussions with the Ministry of Trade, Industry and Fisheries on how the company can provide support in order to alleviate the situations in which companies find themselves. We are ready to play our part,” concludes Søberg.