Economic trends for Norway and abroad

Norwegian economy entering boom period

Published:

Following the cyclical upturn that has lasted for the past one and a half years, the Norwegian economy is now entering a small boom which is expected to result in lower unemployment in 2005 and 2006. Although inflation is expected to edge up somewhat in the time ahead, it is likely to remain well below the inflation target for Norges Bank's interest rate setting.

Statistics Norway's projections are based on a moderate rise in interest rates in the second half of this year followed by unchanged rates for the rest of the projection period. Because it is anticipated that inflation will pick up at a faster pace, there may be a slight fall in the real after-tax lending rates.

The upswing in the Norwegian economy is primarily driven by domestic factors. There has been a sharp pick up in oil investment for more than two years. In addition, following the change in monetary policy from the end of 2002, nominal interest rates have been cut to the lowest level in several years. These factors have had a strong impact on household consumption and housing investments. The upswing is expected to continue until the end of this year. Coupled with continued strong growth in oil investment, low interest rates and moderately good growth internationally, the upswing will be broad-based.

Main economic indicators 1997-2007. Accounts and forecasts. Percentage change from previous year unless otherwise noted
 
  1997 1998 1999 2000 2001 2002 2003 9 2004 9 Forecasts
  2005 2006 2007
 
Demand and output                      
Consumption in households and non-profit organizations 3.2       2.7       3.3       3.9       1.8       3.0       3.0       4.3       4.5       4.2       3.9
General government consumption 2.5 3.3 3.2 1.3 5.8 3.7 1.4 2.0 1.7 1.8 1.9
Gross fixed investment 15.5 13.1 -5.6 -3.6 -0.7 -1.0 -2.0 8.9 10.8 1.6 -3.0
Extraction and transport via pipelines 24.9 22.2 -13.1 -23.0 -4.1 -5.3 16.9 11.5 23.9 -2.7 -13.9
mainland Norway 11.8 8.6 -0.1 -1.2 4.3 2.5 -2.2 6.2 4.9 3.1 1.0
Industries 9.3 8.9 -1.6 0.1 2.5 4.7 -4.9 6.1 2.7 3.2 0.7
Housing 12.1 7.8 3.0 5.6 8.2 -0.6 -5.3 12.4 13.3 5.3 2.3
General government 18.0 8.6 0.5 -11.4 4.2 1.0 9.2 -0.6 -0.6 -0.1 -0.2
Demand from Mainland Norway 1 4.5 3.9 2.6 2.3 3.2 3.1 1.6 4.0 3.8 3.4 2.9
Stockbuilding 2 0.8 0.4 -0.5 0.8 -1.2 -0.2 -0.8 0.9 0.0 0.0 0.0
Exports 7.7 0.6 2.8 4.0 5.0 -0.8 1.6 1.3 3.3 1.7 1.0
Crude oil and natural gas 4.1 -5.8 0.4 4.1 8.8 1.9 -0.6 0.9 2.8 0.6 1.1
Traditional goods 7.6 5.4 2.2 5.1 1.5 0.4 5.1 3.0 4.5 2.3 0.4
Imports 12.4 8.5 -1.8 2.7 0.9 0.7 2.2 9.0 7.1 4.4 2.6
Traditional goods 8.5 9.0 -1.9 3.8 3.6 3.4 4.3 11.1 5.6 4.7 2.8
Gross domestic product 5.2 2.6 2.1 2.8 2.7 1.1 0.4 2.9 3.7 2.0 1.3
Mainland Norway 4.9 4.1 2.7 2.5 2.1 1.4 0.7 3.5 3.8 2.4 1.5
Manufacturing 3.6 -0.7 0.1 -0.8 -0.1 -0.1 -3.9 1.7 3.0 1.2 -2.2
Labour market                      
Total hours worked, Mainland Norway 2.5 2.3 0.6 -0.7 -1.2 -1.2 -1.1 2.2 1.4 0.9 0.2
Employed persons 2.9 2.5 0.8 0.4 0.2 0.0 -0.6 0.2 1.0 1.1 0.2
Labor force 3 2.1 1.6 0.8 0.7 0.3 0.4 0.0 0.2 0.7 0.8 0.7
Participation rate (level) 4 72.7 73.6 73.8 74.0 73.9 73.8 73.3 72.9 72.7 72.7 72.5
Unemployment rate (level) 4.0 3.2 3.2 3.4 3.6 3.9 4.5 4.5 4.1 3.8 4.2
Prices and wages                      
Wages per standard man-year 4.8 6.6 5.3 4.5 5.1 5.3 3.9 3.8 3.8 3.7 3.7
Consumer price index (CPI) 2.6 2.3 2.3 3.1 3.0 1.3 2.5 0.4 1.4 2.1 2.2
CPI adjusted for tax changes and excluding energy products (CPI-ATE) .. .. .. .. 2.6 2.3 1.1 0.3 1.2 2.0 2.2
Export prices, traditional goods -0.6 2.0 -0.4 9.9 -1.6 -8.9 -2.2 8.0 1.5 -2.4 0.2
Import prices, traditional goods -1.2 1.1 -2.9 5.1 -0.7 -7.5 0.4 3.7 -1.3 -1.7 -0.1
Housing prices 5 10.9 9.7 9.4 14.1 7.2 4.0 1.6 10.1 4.6 4.8 1.2
Income, interest rates and excange rate                      
Household real income 4.0 5.9 2.8 3.7 -0.2 7.3 4.7 4.3 3.2 -2.1 2.0
Household saving ratio (level) 2.9 5.9 5.6 5.2 4.2 9.0 10.1 10.2 9.1 3.3 1.5
Money market rate (level) 3.7 5.8 6.5 6.8 7.2 6.9 4.1 2.0 2.2 2.5 2.5
Lending rate, banks (level) 6 6.0 7.4 8.4 8.1 8.9 8.5 6.6 4.2 4.2 4.5 4.6
Real after-tax lending rate, banks (level) 1.7 3.0 3.7 2.6 3.3 4.8 2.3 2.6 1.6 1.2 1.1
Importweighted krone exchange rate (44 countries) 7 -0.4 2.5 -1.2 2.9 -3.1 -8.5 1.3 3.0 -1.7 0.2 0.1
Current account                      
Current balance (bill. NOK) 70.5 0.5 66.4  228.9  235.2  193.9  200.3  231.2  246.5  206.2  199.6
Current balance (per cent of GDP) 6.3 0.0 5.4 15.6 15.4 12.8 12.8 13.7 13.7 11.2 10.5
International indicators                      
Exports markets indicator 9.8 7.8 7.5 11.8 -1.2 2.4 3.9 5.8 5.0 3.0 0.7
Consumer price index, euro-area 1.6 1.1 1.1 2.3 2.1 2.3 2.1 2.2 2.1 1.9 1.9
3 mths. interest rate, euro 4.2 4.2 2.9 4.4 4.2 3.3 2.3 2.1 2.1 2.1 2.1
Crude oil price NOK (level) 8  135 96  142  252  219  197  205  257  268  246  252
 
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   Unemployed (Labour Force Survey) and employment (NA) exclusive of foreigners in foreign shipping.
4   Unemployed (Labour Force Survey) and employment (NA) exclusive of foreigners in foreign shipping as a share of the average population.
5   Freeholder.
6   Households' borrowing rate in private financial institutions. Yearly average.
7   Increasing index implies depreciation.
8   Average spot price Brent Blend.
9   Preliminary figures.
Source:  Statistics Norway. The cut-off date for information was 8 March 2005. Published 10 March 2005.

Statistics Norway's projections are based on the assumption that the growth internationally will level off towards the end of 2005, resulting in reduced growth in demand in Norwegian export markets through 2006. The growth is projected to reach a cyclical peak around the turn of the year. Reduced oil investment combined with the lower growth internationally will dampen the growth in the Norwegian economy.