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Economic Survey

Economic indicators for
Norway

Quarterly national
accounts

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Business cycles

The external
economy

Prices

Economic trends for Norway and abroad

Norwegian economy makes moderate headway

The trend growth of the past two years is expected to continue
for another few years, before an economic upturn in 2014. Unemployment is set to
increase in the years ahead, and thereafter remain more or less unchanged.

The very weak impetus from the global economy is offset by higher growth in
domestic demand. Interest rates are expected to fall slightly going forward, and
will not increase until 2013, when a very modest increase is expected.

Long-term downturn in the global economy

Great uncertainty surrounds the global economy, particularly in relation to
how the EU is handling the debt crisis currently being experienced by a number
of the member states. Growth is weak throughout the entire OECD and growth in
the emerging economies is also showing signs of decreasing. Our projections are
based on the assumption that the debt crisis will not develop into a new global
financial crisis, but that the downturn in the OECD area will nevertheless last
until 2014.

Weak export development

Indications are that Norwegian exports are unlikely to show much growth going
forward. This is due to low growth in demand in the global market, higher wage
growth in Norway than in competing countries and a stronger krone. The global
market prices of key Norwegian export products are also expected to fall.

Lower interest rates

The base rate was last increased in May, and was subsequently 2.25 per cent.
Turbulence in international financial markets has contributed to Norway’s
three-month money market rate increasing to well above the base rate. Given this
high premium, low inflation, low international money market rates and prospects
of a relatively moderate upturn in the Norwegian level of activity, Norges Bank
is likely to reduce the base rate by 0.5 percentage points on 14 December, and
the money market rate in 2012 is expected to remain at 2.8 per cent. Through
2013 and 2014, we expect the base rate to be increased and the money market rate
to increase gradually until reaching just over 4 per cent at the end of 2014.
The average interest on loans in the banks is thus expected to reach 5.6 per
cent in 2014.

High income growth in households

The high income growth in 2011 to date has not led to any marked increase in
household consumption. This is expected to change going forward, assisted by
lower interest rates and interest rate expectations. The income growth in
households is expected to remain high in the years ahead, but not quite as high
as this year since the real wage growth is likely to be lower. Consumption will
to a large extent follow income developments. Per capita, the projections
indicate that growth in consumption will increase gradually from 1 per cent this
year to just over 3 per cent in 2014.

Lower growth in housing market going forward

Following a period of marked increases in house prices and housing
investments, growth was lower in the third quarter. A considerable increase in
the population and high real income growth, in addition to continuing low
interest rates, mean potential for further growth in prices and investments, but
slightly more modest than in the first half of 2011. The housing investments are
expected to increase by almost 22 per cent this year, followed by a clear fall,
leading to growth in 2013 and 2014 of around 4 per cent. The growth in house
prices is estimated to be 8.3 per cent this year, and is expected to fall to
around 6 per cent in the next three years.

Increase in business investments

Investments in the petroleum sector are expected to increase by as much as 15
per cent in 2011. Marked growth is also expected next year, with investments
expected to remain high in 2013 and 2014. The investments in Norwegian mainland
industries have shown a marked increase this year, but growth is expected to
fall considerably in the years ahead.

More expansive fiscal policy after 2012

The Ministry of Finance estimates that money spent from petroleum activities
in 2011 will constitute 3.2 per cent of the capital in the Government Pension
Fund Global at the start of the fiscal year. This figure may turn out to be even
lower. In our projections, the demand impulses from the fiscal policy mainly
follow the estimate in the National Budget in October, but with higher growth in
public demand in 2012. A continued high oil price will contribute to a clear
increase in the Pension Fund. If the authorities were to follow the fiscal
rule’s 4 per cent path, the result would be very expansive impulses in the
subsequent years, unless turbulence in the international financial markets
pulled down the fund’s value substantially. A trade-off between the
consideration to businesses exposed to competition and improved welfare services
and infrastructure, in addition to future challenges faced in relation to the
ageing population, leads us to believe that the fiscal policy will be more
expansive in 2013 and 2014. Nevertheless, the distance to the 4 per cent path is
expected to increase by around 1 percentage point until 2014.

Slight increase in unemployment

The turnaround to growth in the GDP for mainland Norway in autumn 2009
gradually contributed to a marked increase in employment, and unemployment has
fallen slightly since the end of 2010. The increase in employment is expected to
continue going forward, but at a slightly slower rate. The workforce is also
likely to increase, both as a result of a larger share of the population in
various age groups wanting to work and an increase in the population. This is
expected to result in a slight increase in unemployment next year, which will
remain almost unchanged for the remainder of the projection period.

Moderate wage growth and low inflation

The average wage increase in 2011 is expected to be 4.2 per cent, compared
with 3.7 per cent in 2010. A slight increase in unemployment, weak profitability
developments in the business sector and low inflation will contribute to a clear
fall in wage growth, to 3.4 per cent in 2012. Our projections show that wage
growth will subsequently see a small, gradual increase, with growth in 2014
reaching the same level as 2011. Low wage growth, higher productivity growth,
reduced international raw material prices and a strong krone will all contribute
to inflation remaining low. However, the price-curbing impulses will diminish
gradually, which in turn will lead to slightly higher inflation of almost 2 per
cent in 2014.

Main economic indicators 2001-2014. Accounts and
forecasts. Percentage change from previous year unless otherwise noted.
(Corrected 9 December 2011)

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010*

Forecasts

2011

2012

2013

2014

Demand and output

Consumption in households etc.

2.1

3.1

3.2

5.4

4.4

5.0

5.4

1.8

0.0

3.7

2.3

3.4

4.2

4.4

General government consumption

4.6

3.1

1.3

1.2

1.4

1.9

2.7

2.7

4.3

1.7

1.4

2.0

2.9

3.2

Gross fixed investment

-1.1

-1.1

0.8

11.1

13.5

9.8

11.4

0.2

-7.5

-5.2

7.4

5.3

3.0

3.9

Extraction and transport via pipelines

-4.6

-5.4

15.9

10.4

19.2

4.0

6.1

5.2

3.4

-9.0

15.0

10.4

2.3

2.3

mainland Norway

3.9

2.3

-2.9

10.6

12.2

10.5

13.3

-1.3

-13.2

-2.5

8.1

3.6

3.2

4.5

Industries

2.5

4.0

-11.2

10.6

18.6

15.2

21.9

0.8

-23.1

-0.2

4.7

2.8

1.3

2.5

Housing

8.1

-0.7

1.8

16.3

9.7

4.0

2.7

-9.0

-8.2

-2.2

21.6

6.7

4.0

4.3

General government

2.7

1.7

12.5

3.9

2.0

9.7

8.0

4.5

7.4

-7.5

-0.7

0.9

6.5

9.2

Demand from Mainland Norway1

3.0

3.0

1.6

5.1

4.9

5.2

6.3

1.4

-1.6

2.0

3.1

3.1

3.7

4.1

Stockbuilding2

-1.8

0.2

-0.8

1.6

-0.1

0.9

-0.1

-0.1

-2.1

1.9

-0.2

-0.4

0.0

0.0

Exports

4.3

-0.3

-0.1

1.0

0.5

-0.8

1.4

0.1

-4.2

1.8

-0.6

0.4

0.5

1.2

Crude oil and natural gas

6.6

2.4

-0.8

-0.7

-5.0

-6.6

-2.5

-1.0

-2.0

-4.8

-4.1

-0.5

-1.1

-1.1

Traditional goods

1.8

0.8

3.6

3.5

5.3

6.2

9.2

3.2

-8.0

2.6

1.7

0.4

0.1

1.3

Imports

1.7

1.0

1.2

9.7

7.9

9.1

10.0

3.9

-12.5

9.9

2.8

3.1

4.8

5.2

Traditional goods

4.6

3.0

5.6

12.9

8.0

11.6

8.3

0.2

-11.8

7.1

6.3

4.4

4.7

5.6

Gross domestic product

2.0

1.5

1.0

4.0

2.6

2.5

2.7

0.0

-1.7

0.7

1.6

2.0

1.9

2.5

Mainland Norway

2.0

1.4

1.3

4.5

4.4

5.0

5.3

1.5

-1.6

1.9

2.6

2.5

2.7

3.3

Manufacturing

-1.0

-0.7

2.9

5.1

3.9

2.6

3.5

3.7

-7.4

2.4

1.6

-0.8

-0.5

0.4

Labour market

Total hours worked, Mainland Norway

-1.6

-0.9

-2.1

1.9

1.5

3.3

4.3

3.5

-2.0

0.8

1.5

0.9

0.8

1.5

Employed persons

0.3

0.4

-1.2

0.5

1.3

3.5

4.1

3.2

-0.4

-0.1

1.4

1.2

1.2

1.3

Labor force3

0.5

0.7

-0.1

0.3

0.8

1.9

2.5

3.4

0.0

0.5

1.0

1.4

1.3

1.5

Participation rate (level)3

73.5

73.5

72.9

72.6

72.4

72.0

72.8

73.9

72.8

71.9

71.5

71.3

71.2

71.2

Unemployment rate (level)3

3.5

3.9

4.5

4.5

4.6

3.4

2.5

2.6

3.2

3.6

3.3

3.6

3.7

3.7

Prices and wages

Wages per standard man-year

4.8

5.7

4.5

3.5

3.3

4.1

5.4

6.3

4.2

3.7

4.2

3.4

3.7

4.2

Consumer price index (CPI)

3.0

1.3

2.5

0.4

1.6

2.3

0.8

3.8

2.1

2.5

1.3

1.4

1.6

1.9

CPI-ATE4

2.6

2.3

1.1

0.3

1.0

0.8

1.4

2.6

2.6

1.4

1.0

1.5

1.6

1.9

Export prices, traditional goods

-1.8

-9.2

-0.9

8.5

4.3

11.4

2.5

3.0

-6.2

5.5

8.1

-2.4

0.5

2.6

Import prices, traditional goods

-1.5

-7.1

0.0

2.7

0.4

4.1

3.7

4.2

-1.8

-0.5

4.6

0.2

0.4

1.5

Housing prices5

7.1

5.0

1.7

10.1

8.2

13.7

12.6

-1.1

1.9

8.3

8.3

6.5

5.5

5.6

Income, interest rates and excange rate

Household real income

0.0

8.0

4.6

3.3

7.8

-6.4

6.3

3.9

3.9

3.5

5.1

3.6

4.0

3.7

Household saving ratio (level)

3.1

8.4

9.0

7.0

9.8

-0.5

0.9

3.5

6.8

6.3

8.6

8.6

8.5

7.9

Money market rate (level)

7.2

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

Lending rate, banks (level)6

8.8

8.5

6.5

4.2

3.9

4.3

5.7

7.3

4.9

4.5

4.8

4.8

5.0

5.6

Real after-tax lending rate, banks (level)

3.3

4.8

2.2

2.5

1.3

0.7

3.3

1.5

1.4

0.9

2.1

2.0

2.0

2.1

Importweighted krone exchange rate (44
countries)7

-3.1

-8.5

1.3

3.0

-3.9

0.7

-1.8

0.0

3.3

-3.7

-2.6

-0.6

-1.1

-0.6

NOK per euro (level)

8.05

7.51

8.00

8.37

8.01

8.05

8.02

8.22

8.73

8.01

7.80

7.69

7.61

7.56

Current account

Current balance (bill. NOK)

247.5

192.3

195.2

220.6

314.5

357.7

287.4

408.3

254.5

342.4

425.8

402.8

359.6

350.3

Current balance (per cent of GDP)9

16.1

12.6

12.3

12.6

16.1

16.4

12.5

15.9

10.8

13.6

15.7

14.3

12.3

11.4

International indicators

Exports markets indicator

1.4

2.1

2.7

7.8

7.3

9.5

5.5

1.2

-10.7

10.9

5.2

1.5

3.1

4.2

Consumer price index, euro-area

2.3

2.2

2.1

2.1

2.2

2.2

2.2

3.3

0.3

1.7

2.6

1.6

1.3

1.5

Money market rate, euro(level)

4.3

3.3

2.3

2.1

2.2

3.1

4.3

4.6

1.2

0.8

1.4

1.1

1.2

2.1

Crude oil price NOK (level)8

223

198

201

255

356

423

422

536

388

484

623

555

565

595

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.

7

Increasing index implies depreciation.

8

Average spot price Brent Blend.

9

Corrected 9 December 2011.

Source: Statistics Norway. The
cut-off date for information was 6. December.

Published 8 December 2011 © Statistics Norway