STAVANGER, Norway (Reuters) - In Norway’s oil capital Stavanger, house prices are falling, unemployment is rising and orders of champagne and sushi sprinkled with gold are down - a taste of things to come for the rest of the country as slumping crude prices hit the economy.
The oil-producing nation used to be the exception in Europe. At the height of the financial crisis in 2009, unemployment reached just 2.7 percent; when other nations have had to cut welfare spending, Oslo could rely on its $856-billion sovereign wealth fund to plug any budget deficit.
But now it is joining the rest of Europe in its economic slump as oil prices have halved. GDP growth is expected to stagnate at 1.2 percent in 2015 and 2016. And the government expects to make its first ever net withdrawal from the fund next year as state oil revenues decline with crude prices.
“It is a new era for the Norwegian economy. We are no longer in a league of our own,” Governor Oeystein Olsen said when the central bank unexpectedly cut rates to 0.75 percent on Sept. 24 to support a slowing economy.
Business conditions for companies in Stavanger and the surrounding region got even worse in the third quarter and the weaker sentiment is spreading to firms outside the energy industry, a survey said in September.
Demand is lower and profitability is down, it said. Boosting competitiveness has been the mantra of the right-wing minority government of Prime Minister Erna Solberg, which is proposing to cut corporate tax to boost firms’ international competitiveness.
Norway as an exception was most on show in Stavanger, the country’s fourth-largest city, with its compact center of white wooden houses and oil industry ships anchored in the harbor. It enjoyed the good times more than anywhere else.
“I think now we have to adjust to a more moderate level,” said Finn, a 46-year-old oil worker who lost his job at an industry supply business in September and is looking for work outside the sector.
Stavanger and its region account for 72 percent of the country’s rise in unemployment over the past year as oil firms and their suppliers cut costs and fire workers.
“I will probably earn 50,000-100,000 crowns ($6,000- $12,000) less ... But I would rather have a job than be unemployed. That’s life,” the father-of-two told Reuters over coffee at his home in the city center.
He preferred not to give his last name to increase his chances of finding another job.
At 2.9 percent, unemployment in Norway is still low by international standards. But it is on the rise and people are starting to worry.
Thirty-eight percent of employees were concerned they may lose their jobs in the coming year, up from 33 percent last year, according to a survey by trade union YS this month, the highest level recorded since the survey started in 2009.
In Stavanger, the tightening job situation has hit house prices, which are down 1.2 percent over the past 12 months, while nationally they have risen 7.7 percent.
“People are pickier because there is more to choose from,” said Trond Kristoffersen, a real estate agent at a showing for a 65-square meter (700 square feet) flat in a leafy part of town, valued at 2.1 million crowns ($260,000).
“As the market is today, I normally sell at the asking price or below. Before I sold at the asking price or above. People bidding over the asking price happened a lot more before, not so much now,” he told Reuters. “It is tough, but I am an optimist.”
In September Scandinavian Airlines (SAS.ST) dropped its business-class only route between Stavanger and its oil cousin Houston in Texas due to lower demand.
Despite a population of only 130,000 people, Stavanger enjoyed a booming high-end restaurant scene fueled by oil executives’ business lunches. But that is changing too.
“Companies don’t throw big parties anymore,” said Svein-Are Brynestad, manager of the Boelgen & Moi brasserie, which dishes up a mushroom risotto at 225 crowns ($28).
“Instead of ordering five to six courses, they will order three courses. They will go for the house champagne rather than the grand cru or the Magnum.” He said reservations were down 15 percent over the past year.
“The sky was the limit. Stavanger, and Norway for that matter, needed the correction,” said Njaal Solland, founder of Sabi Omakase, which serves sushi sprinkled with gold, and where reservations are also down.
“I still see people driving around in Range Rovers and Porsche Cayennes, so it is not a complete crisis,” said Svein Erik Renaa, chef and founder of modern Nordic restaurant Renaa. “But if it continues as it is now then I will start to worry.”
($1 = 8.0767 Norwegian crowns)
Editing by Giles Elgood