Economic trends for Norway and abroad
Gentle upturn in 2013
The trend growth is expected to continue into 2013. A modest upturn in the economy will then begin. Lower growth internationally will be offset by a slight increase in domestic demand, and the petroleum sector in particular will be a key driving force behind the growth.
Interest rates are expected to remain low in 2012 and gently increase from 2013. The mortgage rate is estimated to be 5.5 per cent by the end of 2015.
Substantial downturn in the global economy to give weak export development
In 2011, economic growth in the OECD area and a number of emerging economies abated. The euro area is marked by the public debt crisis and a struggling banking sector. A substantially more restrictive fiscal policy will contribute to the expected fall in the GDP in the euro area in 2012. GDP growth in the US economy also fell in 2011, but increased considerably towards the end of the year. The effects of the stagnant international trade and domestic anti-inflationary measures that are curbing GDP growth can now clearly be seen in many emerging economies. Together with an impaired cost-related competitive power in Norway, weak international growth will contribute to low export growth for several years to come.
Low interest rates
The base rate was reduced to 1.75 per cent in December 2011. Turbulence in international financial markets has contributed to Norway’s three-month money market rate increasing to well above the base rate. This is expected to continue for some time and an unchanged base rate for the remainder of 2012 will lead to a money market rate of 2.8 per cent for 2012. From early 2013 until the end of 2015, the base rate is expected to increase, and the money market rates will gradually increase to almost 5 per cent at the end of 2015.
High income growth in households
Uncertainty surrounding developments in the Norwegian and global economies are presumed to be partly responsible for the lack of impact that the increase in households’ saving has had on consumption. This is expected to change gradually, and developments in consumption will follow incomes to a greater extent. The income growth in households is expected to remain high going forward, but slightly lower than in 2011. Towards the end of our analysis horizon, the anticipated interest hikes will reduce the income growth. Per capita, the projections indicate that growth in consumption will increase gradually from almost 2 per cent this year to just over 2.5 per cent in the years 2013-2015.
Slightly lower growth in housing market going forward
A strong increase in the population, as well as favourable growth in households’ incomes and low interest rates have all contributed to the marked growth in housing prices. This has led to an increase in the housing investments. Very high investment growth was seen in the first half of 2011, but this subsequently abated. The housing investments are expected to continue growing by around 5-6 per cent going forward. The factors that have contributed to the increase in housing prices are expected to prevail going forward. Although the more stringent deposit requirement will curb growth, higher housing prices are still expected going forward, albeit not to the same extent as in recent years.
Increase in business investments
Investments in the petroleum sector increased by more than 11 per cent in 2011, and further growth is expected in 2012. Investments will remain high for some years ahead, but at a more modest growth rate. The current operating expenses in the form of intermediate input, have for a long time been increasing, and will also make a clear contribution to economic growth going forward. The investments in Norwegian mainland industries showed a marked increase towards the end of 2011. The total investment is expected to increase in the years ahead, but the growth rate will be much lower than during the last upturn in the economy.
More expansive fiscal policy after 2012
General government’s use of goods and services will contribute to dampen economic growth in 2012. High growth in the transfers to households will pull in the opposite direction, and overall, the fiscal policy is expected to be roughly neutral this year. In the years ahead, slightly higher growth is expected in public demand, leading to a moderately expansive fiscal policy. Substantial oil revenues going forward may contribute to a fall in the structural non-oil public deficit to just above 2 per cent of the Government Pension Fund Global.
Slight increase in unemployment
The positive development in employment since the second half of 2010 continued in 2011, and is expected to continue going forward. However, the labour force will also increase. Projections indicate both a continued high increase in the population driven by the high immigration rate, and a larger share of the population in various age groups wanting to work. This is expected to result in a slight increase in unemployment going forward, followed by the start of a slight fall from 2014.
Higher real wage growth and low inflation
A slight increase in unemployment, weak profitability developments in many traditional internationally-exposed manufacturing industries and low inflation will contribute to a fall in wage growth. Growth in the average annual salary of 3.6 per cent is expected in 2012, compared with 4.3 per cent in 2011. A roughly unchanged wage growth in 2013 will be followed by a somewhat increasing growth for some years after 2013, by which time the upturn in the Norwegian economy will have been ongoing and the global economy will also have improved slightly. Lower electricity prices in 2012 compared to 2011, together with a slightly stronger krone and lower wage growth will contribute to continued low growth in the consumer price index (CPI) in 2012 of 1.3 per cent; around the same as last year. Higher wage growth, a slight increase in electricity prices and a flattening out followed by an eventual modest weakening of the krone will all pull inflation up in the years ahead. Projections indicate that CPI growth in 2015 will reach 2.6 per cent.
|Demand and output|
|Consumption in households etc.||3.1||3.2||5.4||4.4||5.0||5.4||1.8||0.0||3.7||2.2||3.2||4.0||3.9||4.0|
|General government consumption||3.1||1.3||1.2||1.4||1.9||2.7||2.7||4.3||1.7||1.5||2.2||2.8||3.1||2.4|
|Gross fixed investment||-1.1||0.8||11.1||13.5||9.8||11.4||0.2||-7.5||-5.2||6.9||7.2||4.2||5.2||4.6|
|Extraction and transport via pipelines||-5.4||15.9||10.4||19.2||4.0||6.1||5.2||3.4||-9.0||11.4||14.1||3.4||2.9||2.1|
|Demand from Mainland Norway 1||3.0||1.6||5.1||4.9||5.2||6.3||1.4||-1.6||2.0||3.1||3.2||3.8||4.1||3.9|
|Crude oil and natural gas||2.4||-0.8||-0.7||-5.0||-6.6||-2.5||-1.0||-2.0||-4.8||-4.4||0.1||0.1||-1.1||0.2|
|Gross domestic product||1.5||1.0||4.0||2.6||2.5||2.7||0.0||-1.7||0.7||1.6||2.2||2.0||2.4||2.7|
|Total hours worked, mainland Norway||-0.9||-2.1||1.9||1.5||3.3||4.3||3.5||-2.0||0.8||1.5||0.9||1.3||1.8||1.7|
|Labor force 3||0.7||-0.1||0.3||0.8||1.9||2.5||3.4||0.0||0.5||1.0||1.6||1.6||1.4||1.3|
|Participation rate (level) 3||73.5||72.9||72.6||72.4||72.0||72.8||73.9||72.8||71.9||71.5||71.4||71.5||71.4||71.3|
|Unemployment rate (level) 3||3.9||4.5||4.5||4.6||3.4||2.5||2.6||3.2||3.6||3.3||3.4||3.5||3.5||3.4|
|Prices and wages|
|Wages per standard man-year||5.7||4.5||3.5||3.3||4.1||5.4||6.3||4.2||3.7||4.3||3.6||3.7||4.4||4.9|
|Consumer price index (CPI)||1.3||2.5||0.4||1.6||2.3||0.8||3.8||2.1||2.5||1.2||1.3||1.7||2.1||2.6|
|Export prices, traditional goods||-9.2||-0.9||8.5||4.3||11.4||2.5||3.0||-6.2||5.3||6.2||-1.3||0.7||2.4||3.8|
|Import prices, traditional goods||-7.1||0.0||2.7||0.4||4.1||3.7||4.2||-1.8||-0.6||4.1||-1.9||-0.6||1.3||3.0|
|Housing prices 5||5.0||1.7||10.1||8.2||13.7||12.6||-1.1||1.9||8.3||8.0||5.5||5.8||5.8||6.7|
|Income, interest rates and excange rate|
|Household real income||8.9||4.6||3.3||7.8||-6.4||6.3||3.9||3.9||3.5||4.0||3.6||3.8||3.7||2.7|
|Household saving ratio (level)||8.4||9.0||7.0||9.8||-0.5||0.9||3.5||6.8||6.3||8.2||8.4||8.3||8.2||7.0|
|Money market rate (level)||6.9||4.1||2.0||2.2||3.1||5.0||6.2||2.5||2.5||2.9||2.8||3.1||3.8||4.7|
|Lending rate, credit loans(level) 6||8.5||6.5||4.2||3.9||4.3||5.0||6.8||4.0||3.4||3.6||3.8||4.0||4.6||5.3|
|Real after-tax lending rate, banks (level)||4.8||2.2||2.5||1.3||0.7||3.3||1.5||1.4||0.9||2.1||2.3||2.1||2.1||2.1|
|Importweighted krone exchange rate (44 countries) 7||-8.5||1.3||3.0||-3.9||0.7||-1.8||0.0||3.3||-3.7||-2.4||-0.4||-0.5||0.0||1.2|
|NOK per euro (level)||7.5||8.0||8.4||8.0||8.1||8.0||8.2||8.7||8.0||7.8||7.6||7.6||7.6||7.7|
|Current balance (NOK billion)||192.3||195.2||220.6||314.5||357.7||287.4||408.3||254.5||313.6||387.0||426.9||407.4||381.1||371.2|
|Current balance (per cent of GDP)||13.2||12.3||12.6||16.1||16.4||12.5||16.0||9.7||12.4||14.3||14.8||13.6||12.2||11.2|
|Exports markets indicator||2.3||2.8||7.7||7.1||9.6||5.6||1.2||-10.6||11.0||5.5||1.7||3.2||4.5||5.8|
|Consumer price index, euro-area||2.2||2.1||2.1||2.2||2.2||2.2||3.3||0.3||1.7||2.6||1.6||1.3||1.7||1.9|
|Money market rate, euro(level)||3.3||2.3||2.1||2.2||3.1||4.3||4.6||1.2||0.8||1.4||1.1||1.3||1.9||2.8|
|Crude oil price NOK (level) 8||198||201||255||356||423||422||536||388||484||621||639||627||627||659|
|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||According to Statistics Norway's labour force survey(LFS). Break in data series in 2006.|
|4||CPI adjusted for tax changes and excluding energy products.|
|5||Break in data series in 2004.|
|6||Yearly average. Lending rate, banks until 2006.|
|7||Increasing index implies depreciation.|
|8||Average spot price Brent Blend.|
|Source: Statistics Norway. The cut-off date for information was 14 February.|