Press Release

No. 74/98
Date: 30.10.1998

IMF’s assessment of the Norwegian economy

The IMF-delegation visiting Norway for the annual consultations with Norwegian authorities has presented to the Government its preliminary conclusions on the Norwegian economy. The IMF comments on the economic development in Norway, and on how the economic policy meets the needs of the economic situation.

- The Government shares the view of the IMF that there is a need for fiscal contraction, says Minister of Finance Gudmund Restad. I have taken note of the view of the IMF, that a fiscal contraction as reflected in the Government’s budget proposal is considered as the minimum necessary. This emphasises the importance of all political parties in the Parliament showing responsibility, so that we can adopt a sufficiently tight budget that meets the needs of the economic situation, says Restad.

- However, I am surprised about IMF’s reference to an alleged “breakdown” of the economic strategy in Norway. Even though increasing demand pressures gradually have developed in the Norwegian economy, the fundamentals are sound compared to the situation in most other countries. Through a fiscal contraction next year, the possibilities for Norway to restore the balance in the economy are good, so that we can achieve stable economic growth with high employment rates, a low rate of unemployment and a low rate of inflation in the years to come.

- I have noticed that the IMF says that there may be merit in considering a shift to an inflation targeting framework for monetary policy, says Restad. In IMF’s view, however, this requires that two important conditions are met. Firstly, there has to be political acceptance of the need for continued fiscal discipline. Thus, the need for a tight fiscal policy is independent of which monetary framework is chosen. Secondly, a shift of monetary framework will require a willingness to provide Norges Bank (the Norwegian central bank) with greater operational independence.

- I have also noticed that, according to IMF, the near term prescription for monetary policy does not depend on the monetary policy regime.

- The Government’s view, as reflected in the National budget 1999, is that the Norwegian monetary policy regime will remain unchanged, says Minister of Finance Gudmund Restad.

Contact: Anne-Sissel Skånvik, telephone +47 22 24 41 09