A depression is defined as a 10 percent drop in economic activity or a downturn lasting more than two years. Svalbard has already blown through the first qualification with a 15.8 percent drop in activity in 2015 and stands a good chance of meeting the second this year.
The downturn was caused by a 39 percent drop in mining-related activity, which in turn fueled a 43.1 percent drop in transportation and storage, activity, according to Statistics Norway.
But despite the sharp downturn, employment in the archipelago actually rose one percent compared to 2014 due largely to increased activity in tourism and recreation, with tourism surpassing mining as the biggest employer. That may be a sign of Longyearbyen making a quick and drastic change from its century-long history as a coal mining one due to what the agency described as a “rapid growth in part-time jobs.”
Also, the total includes all settlements, which means gains in the Russian settlement of Barentsburg (471 residents) due to its aggressive tourism expansion may mean the figures for Longyearbyen (2,144 residents) are lower than the overall picture. The agency’s report does not detail activity by settlement.
Local leaders said the slump was expected and is likely to continue until at least the beginning of next year as Store Norske completes its near shutdown of all operations this fall.
“I don’t think they are down more than expectations,” said Longyearbyen Mayor Arild Olsen, referring to the economic production figures. He is also standing by his prediction from a year ago that the economy will begin to recover by mid-2017 and the town will continue a long-term growth trend.
“If you look at Longyearbyen in the past 30 years, the last 10 to 15 has seen growth in high proportions,” he said.
The town’s small population and lack of industrial diversity means it is more subject to sharp economic rises and drops than large mainland cities, said Lasse Hansen, a co-owner of Pole Position Logistics, a cargo and freight company. But he said that also means the community will be able to adjust faster.
“We are quite vulnuerable, but we have to have this hope and belief,” he said. “From every depression you get new ideas and lots of people with creativity,” he said.
Diversifying the town’s economy is the primary emphasis of a revised “white paper” published by the Norwegian government earlier this year outlining policy goals for Svalbard. But while the government approved a 500 billion kroner bailout package for Store Norske last year – meaning operations have been largely subsidized – it has made scant financial commitments beyond a 50 million kroner economic stimulous package intened to improve infrastructure and offer some small business incentives.
Olsen said he is satisfied with short-term planning to maximize existing resources and with the tourism industry’s current expansion efforts. But he said the lack of progress on longer-term plans such as drastically expanding education and research, and establishing a fish processing industry, is discouraging – but not entirely unexpected given an oil price slump that is causing budget problems at the national level.
“It’s difficult in this tough economy in Norway,” he said. “The main goal for now is to have activity in Svalbard, not necessarily make it bigger.”
Svalbard generated 3.049 billion kroner in overall economic activity during 2015. Mining remained the highest grossing industry despite its sharp decline with 593.7 million kroner, followed by construction and infrastructure with 507.6 million, retail sales and vehicle repairs with 443.6 million, tourism with 334 million, and information and communication with 321.2 million.
Cultural and leisure activities represented the biggest increase in economic activity with a 14 percent rise, followed by tourism with 10.2 percent.
There was a total of 1 647,71 full-time-equivalent jobs in Svalbard in 2015. Tourism accounted for 268.6 jobs (a 9.5 percent increase), while mining represented 262.4 (a 25.3 percent decrease). Infrastructure and related industrial activity saw the largest rise percentagewide, with it’s 55.4 jobs up 43.5 percent from the year before.