Reports 2015/10

Economic trends for Møre og Romsdal

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The economic outlook in Møre og Romsdal is, like in the nation generally, characterized by Norway entering a period of slower growth after the oil prices fell dramatically during the second half of 2014 and into 2015. After nearly four years with an oil price above USD 100 a barrel, it fell toward USD 45 in the first half of January 2015, before it turned, and rose to a little over USD 60 in mid-February 2015. Lower oil prices are associated with lower activity on the Norwegian continental shelf, which has repercussions for the mainland economy with weaker employment trends, higher unemployment and lower growth in real wages.

International developments are still weak in many countries, and the aftermath of the financial crisis and sovereign debt problems are still noticeable. However, there are tendencies toward somewhat better development for some of our trading partners, especially the United Kingdom and the United States, and one would expect that economic prospects internationally may improve slightly as a result of the fall in oil prices. The growth in Norwegian export markets rose slightly last year, and is also in 2015 expected to remain above the low growth in 2011 and 2012. In 2016 and 2017 the global growth is expected to increase further.

The oil price drop contributes to weaken the value of the Norwegian krone in relation to other currencies. Weaker krone reduces the households’ purchasing power, as a result of higher prices, while the oil price decline in itself pulls in the opposite direction. The somewhat weaker growth that we envision in 2015 is largely driven by falling oil investments and lower consumption growth. A weaker krone will, however, provides an enhanced Norwegian cost competitiveness and gives impetus to higher growth in competitive industries among exporters and those who produce for the domestic market. Lower interest rates will have a positive impact on domestic demand.

We anticipate that the workforce increases slightly more than employment in the current year and the next year, so that unemployment increases somewhat. A deteriorating economic situation contributes to a weaker population growth because of slightly lower immigration and slightly higher emigration compared with what would otherwise have been the case. The rise in unemployment will be curbed by this and possibly also by some residents withdrawing from the labor market when job opportunities fall.

After a clear production growth in primary industries last year, small changes in production are expected this year. The manufacturing production for the country as a whole is expected to decline slightly this year, and this is also the expectation in the county of Møre og Romsdal, while the production trend in construction activities is still expected to be positive. The production in market-oriented service activities are expected to go up slightly, but significantly less than last year, while output in the public sector is expected to increase roughly in line with last year.

Møre og Romsdal had a rise in employment in 2014, with increased employment in all major industries consisting of primary industries, manufacturing, construction and market-oriented and public services. Estimates show a weak employment growth in the current year, measured as an annual average, and clearly weaker than last year. Manufacturing employment is expected to decline, while public services contribute most to the growth.

The employment growth in Møre og Romsdal is expected to be weak, albeit positive, also next year, with an expected increase approximately as projected for the country as a whole. Small changes are expected in the employment in primary industries and manufacturing, while the development in the construction industry and public services is expected to be positive.

The number of residents in Møre og Romsdal went clear up in 2013, albeit not as much as in the record year of 2012. Figures for the first three quarters of 2014 still show clear increase in population. This reflects a positive birth surplus and a high surplus in net immigration from abroad, while net out-migration to other regions in Norway is somewhat lower than in the previous year. The population growth is expected to continue, but with somewhat lower growth in net immigration. The same is expected for the number of people of working age. Projected developments in labor force and employment indicate an increase in unemployment in Møre og Romsdal, both the current year and next year, but the unemployment in the county will still remain lower than nationwide.

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