Economic Survey 2-2007

The cyclical upturn in the Norwegian economic has continued into 2007. GDP growth remains high and there are no signs of slower growth. Growth in employment and the labour force is strong. Unemployment fell sharply through 2006 and has been low and stable since the beginning of 2007. Lower unemployment rates have not been recorded since the 1980s. Inflation is low, but edging up. Global commodity prices, including crude oil prices, remain at very high levels. This is contributing to sustaining the large surpluses on the central government budget and the current account. As a result, the value of the Government Pension Fund – Global is rising rapidly. According to the Revised National Budget for 2007, Norway will spend less than the expected real return on the capital in the Fund for the first time since the fiscal rule was introduced. This means that Norway is not only saving the totality of current government petroleum revenues, but also a fraction of the expected real return on the Fund. This is in line with fiscal rule given the cyclical situation. Against the background of a pronounced cyclical upswing in the Norwegian economy, Norges Bank has gradually increased its key policy rate over the past two years.