Economic trends for Norway and abroad

Economic expansion at a standstill


The year 2001 marked an end to five years with a period of strong economic activity in the Norwegian economy. From early 1998 the GDP growth for the mainland economy has been 1 to 1 1/2 per cent below the estimated long-term growth potential. The labour market continued to weaken throughout 2001. During the same time the price increases declined. Somewhat stronger domestic demands than previously assumed will most likely result in a stable rate of unemployment in the near future. Interest rates are expected to decrease slightly.

International economy was in 2001 greatly influenced by the decline in the USA economy and its effect on the rest of the world. At the same time the growth estimates were adjusted downwards – the expectations for 2002 were reduced, especially after the terror attacks on the USA 11 September. Oil prices were on a high level in the beginning of the year but fell considerably throughout 2001. Prices of raw material fell as well, and the consumer price growth showed a marked declining tendency after a strong growth the two previous years.

The Central Banks' interest rates were partially reduced.

With a rapid change in the USA's economy – the growth in the EU countries will most likely recover at the latest this coming summer.

Oil investments adjusted upwards for 2003

The year 2002 is the first year when the fiscal policy will be shaped according to the new policy rule. With emphasis on reduction of dues and taxes the expansive effects of the new rule will be marginal. In view of the approved plan for this year, the rule offers little room for new measures for next year.

Mainland Norway's investments are expected to increase – following a decline throughout recent years. Low price growth will contribute to an extremely high real income growth in 2002, even with a lower growth in wages and salaries than last year.

Norwegian enterprises continue to lose market shares due to lack of competitiveness. Hence, it will probably not benefit from the anticipated upswing abroad. A stronger growth in the household consumption and a change in the investment will cause the mainland production to grow at higher rate than previously assumed.

Increased investments in the oil sector as well will contribute to a stronger growth in the mainland production than previously assumed. This is expected to result in no noticeable changes in unemployment throughout 2002 and 2003, that is we may avoid the weakening of the labour market that was expressed in our previous analysis.

The reduction of interest rates in the future is hardly as strong as we expressed in our previous report. We do expect, however, that the three-month money market interest rate will be six per cent from this coming summer and throughout 2003. The rate of growth in the consumer price index fell clearly throughout the second half of last year, and the rate of price increase is expected to fall further in the first half of this year. Adjusted for the contribution from changes in dues and energy goods, the growth rate is expected to stay more or less unchanged, just below 2.5 per cent in 2002 and 2003.

Main economic indicators 2001-2003. Accounts and forecasts. Percentage
change from previous year unless otherwise noted
  Accounts Forecasts
            2001           2002           2003
Demand and output      
Consumption in households and non-profit organizations 2,2 3,0 2,7
General government consumption 1,5 1,7 2,0
Gross fixed investment -5,9 0,8 2,9
Petroleum activities -3,1 -3,8 11,5
Mainland Norway -2,7 -0,2 0,8
Firms -4,8 -3,0 -1,9
Housing 7,8 3,4 8,1
General government -5,6 4,9 1,4
Demand from mainland Norway 1 1,1 2,1 2,2
Stockbuilding 2 -0,7 0,0 0,0
Exports 5,3 3,7 2,0
Crude oil and natural gas 7,3 5,4 0,4
Traditional goods 3,0 2,1 2,0
Imports 0,3 3,7 4,0
Traditional goods 3,1 3,5 3,5
Gross domestic product 1,4 2,3 1,8
Mainland Norway 1,0 1,6 2,0
Labour market      
Employed persons 0,4 0,4 0,5
Unemployment rate (level) 3,6 3,8 3,8
Prices and wages      
Wages per standard man-year 4,9 4,3 3,7
Consumer price index (CPI) 3,0 1,1 1,9
CPI adjusted for tax changes and excluding energy products (CPI-ATE) 2,6 2,4 2,3
Export prices, traditional goods -1,9 -3,1 8,5
Import prices, traditional goods 1,1 -2,6 2,8
Housing prices 6,6 5,7 8,1
Balance of payment      
Current balance (bill. NOK) 217,7 170,9 168,0
Current balance (per cent of GDP) 14,8 11,6 11,1
Memorandum items      
Household saving ratio (level) 7,4 9,3 9,9
Money market rate (level) 7,2 6,1 6,0
Lending rate, banks (level) 3 8,8 7,5 7,3
Crude oil price NOK (level) 4 220,1 174,4 178,7
Exports markets indicator 0,4 4,0 7,0
Importweighted krone exchange rate (44 countries) 5 -3,2 -0,8 0,5
1   Consumption in households and non-profit organizations + general government consumption + gross fixed capital
formation in mainland Norway.
2   Change in stockbuilding. Per cent of GDP.
3   Households' borrowing rate in private financial institutions.
4   Average spot price Brent Blend.
5   Increasing index implies depreciation.
Source:  Statistics Norway. The cut-off date for information was 5 February 2002. Published 7 Februar 2002