Economic trends for Norway and abroad
The Norwegian economy has seen a moderate upturn in the last four quarters, and growth in the GDP for mainland Norway has been relatively high. A somewhat more marked upturn is expected next year, and projections indicate that 2015 will mark the end of the moderate slump of the last six years. Unemployment will remain stable.
The recent development of low international growth offset by higher domestic demand is expected to continue. The petroleum sector will be a key driver of growth in 2012, while demand from mainland Norway will gradually become more prevalent going forward. International growth is also set to increase in 2014 and 2015, and this will contribute to higher production growth in Norway.
Substantial downturn in the global economy means weak export development
International economic developments worsened in the second half of 2011, and the negative trend continued into 2012. GDP growth has fallen in almost all countries. The public debt crisis and reduced confidence in European banks have been partly to blame for a fall in the level of activity in many European countries. The development in the US economy has been more positive than in Europe, but growth here is also curbed. Production growth has slowed down in several emerging economies, thereby making a smaller contribution to the growth in the global economy. The international downturn is expected to last another two years. Together with an impaired cost-related competitive power in Norway, this will mean little increase in Norwegian exports in 2012 and 2013. Higher international growth will subsequently help push up export growth.
Low interest rates
Weak international economic trends and a relatively strong krone led to a reduction in the base rate in March, to 1.5 per cent. At the end of May, the money market rate fell to 2.3 per cent, where it is expected to remain in 2012. From summer 2013 until the end of 2015, it is expected that the base rate will gradually be increased, with the money market rate reaching 4.3 per cent at the end of 2015. The projected interest on loans at the end of 2015 is 5 per cent.
Higher real wage growth and low inflation
Wage growth so far this year and the outcome of the wage settlements have been somewhat higher than previously estimated. The projection for annual salary increases in 2012 has therefore been adjusted upwards by 0.5 percentage points to 4.1 per cent. Widespread weak profitability in the internationally-exposed manufacturing industry, excluding suppliers to the petroleum sector, will lead to a modest wage drift in manufacturing and a slightly lower wage growth in 2013 compared to 2012. Nevertheless, low underlying inflation in Norway and falling energy prices are expected to contribute to high real wage growth. Estimated growth in the Consumer price index (CPI) is 1 per cent in 2012 and 1.3 per cent next year.
High income growth in households is pushing up consumption
High growth in real wages and employment are set to increase households’ real income in 2012. The average interest on loans is expected to be lower next year than this year, which will lead to a further increase in income growth. Higher interest rates will subsequently curb growth. Uncertainty about developments in the Norwegian and global economies are presumed to be partly responsible for the increase in households’ savings. Going forward, consumption is expected to grow more in pace with incomes and will be much stronger than last year.
Stable growth in house prices
A strong increase in the population, as well as high growth in households’ incomes and low interest rates, have all contributed to the growth in house prices. This led to strong growth in the housing investments in the first half of 2011, which has subsequently flattened out. Prospects of a long period with low interest rates and high income growth are expected to renew the drive to build houses. The growth in house prices is also expected to continue.
Strong growth in investments in petroleum sector
Investments in the petroleum sector increased by more than 13 per cent in 2011, and this is expected to be echoed in 2012. Investments will remain high for some years to come, but the considerably more modest growth rate will reduce the petroleum sector’s contribution to domestic activity growth. Investments in Norwegian mainland industries have shown no clear trend over the past year. These investments are expected to increase in the coming years, but growth rates will be much lower than in the last upturn.
Moderate expansive fiscal policy
Public demand is on course for a modest growth this year. However, high growth in the transfers to households will lead to a roughly neutral fiscal policy this year. In the years ahead, slightly higher growth is expected in public demand, leading to a moderately expansive fiscal policy. Substantial oil revenues are expected despite the projected clear fall in the oil price. This will lead to a marked increase in the Government Pension Fund Global and a potential fall in the structural non-oil public deficit to just above 2 per cent of the Fund’s value in 2015.
Increase in employment, but stable unemployment
Employment has seen a marked increase over almost two years, and will continue to increase as a result of the upturn. However, the large increase in the population and a growing willingness to work will also lead to a larger labour force. Thus, unemployment is expected to remain stable at around 3.3 per cent going forward.
|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||2.4||3.9||4.3||4.6||4.3|
|General government consumption||3.1||1.3||1.2||1.4||1.9||2.7||2.7||4.3||1.7||1.5||2.3||2.6||2.8||2.5|
|Gross fixed investment||-1.1||0.8||11.1||13.5||9.8||11.4||0.2||-7.5||-5.2||6.4||6.1||4.6||4.7||4.1|
|Extraction and transport via pipelines||-5.4||15.9||10.4||19.2||4.0||6.1||5.2||3.4||-9.0||13.4||12.8||3.6||2.7||2.3|
|Demand from Mainland Norway 1||3.0||1.6||5.1||4.9||5.2||6.3||1.4||-1.6||2.0||3.2||3.1||4.0||4.3||4.0|
|Crude oil and natural gas||2.4||-0.8||-0.7||-5.0||-6.6||-2.5||-1.0||-2.0||-4.8||-6.2||2.7||-1.0||-1.5||0.3|
|Gross domestic product||1.5||1.0||4.0||2.6||2.5||2.7||0.0||-1.7||0.7||1.4||3.1||2.0||2.6||2.9|
|Total hours worked, Mainland Norway||-0.9||-2.1||1.9||1.5||3.3||4.3||3.5||-2.0||0.8||1.6||2.0||0.8||1.8||1.9|
|Labor force 3||0.7||-0.1||0.3||0.8||1.9||2.5||3.4||0.0||0.5||1.0||2.2||1.8||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||71.4||71.9||72.1||72.0||71.9|
|Unemployment rate (level) 3||3.9||4.5||4.5||4.6||3.4||2.5||2.6||3.2||3.6||3.3||3.3||3.4||3.3||3.2|
|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||4.2||4.1||3.9||4.2||4.3|
|Consumer price index (CPI)||1.3||2.5||0.4||1.6||2.3||0.8||3.8||2.1||2.5||1.2||1.0||1.3||1.9||2.3|
|Export prices, traditional goods||-9.2||-0.9||8.5||4.3||11.4||2.5||3.0||-6.2||5.3||6.2||-1.8||0.2||3.0||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||-0.8||-1.2||1.3||2.3|
|Housing prices 5||5.0||1.7||10.1||8.2||13.7||12.6||-1.1||1.9||8.3||8.0||7.0||6.3||6.9||7.6|
|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||4.2||4.0||4.5||4.0||2.6|
|Household saving ratio (level)||8.4||9.0||7.0||9.8||-0.5||0.9||3.5||6.8||6.3||8.2||8.2||8.5||8.1||6.4|
|Money market rate (level)||6.9||4.1||2.0||2.2||3.1||5.0||6.2||2.5||2.5||2.9||2.3||2.4||3.1||4.0|
|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||3.9||3.6||3.9||4.7|
|Real after-tax lending rate, banks (level)||4.8||2.2||2.5||1.3||0.7||2.9||1.1||0.7||0.1||1.3||1.8||1.2||0.9||1.1|
|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||-0.5||-0.8||0.3||1.3|
|NOK per euro (level)||7.5||8.0||8.4||8.0||8.1||8.0||8.2||8.7||8.0||7.8||7.5||7.4||7.4||7.6|
|Current balance (bill. NOK)||192.3||195.2||220.6||314.5||357.7||287.4||408.3||254.5||313.6||395.9||422.9||332.1||293.6||307.5|
|Current balance (per cent of GDP)||13.2||12.3||12.6||16.1||16.4||12.5||16.0||9.7||12.4||14.6||14.6||11.2||9.5||9.4|
|Exports markets indicator||2.3||2.8||7.7||7.1||9.6||5.6||1.2||-10.6||11.0||5.5||1.5||2.5||4.1||5.4|
|Consumer price index, euro-area||2.2||2.1||2.1||2.2||2.2||2.2||3.3||0.3||1.7||2.7||2.1||1.5||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||0.7||0.8||1.4||2.5|
|Crude oil price NOK (level) 8||198||201||255||356||423||422||536||388||484||621||613||545||554||578|
|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 5 June.|