Economic Survey 3-2007

The global economic picture has changed in the course of summer. The cyclical downturn in the US has spread from the housing market to the credit market, and heightened uncertainty has spread to international financial markets. While most observers recently expected that developments in the world economy would be more balanced in 2008 – the OECD Economic Outlook in June is typical in this respect - there are now a growing numbers that fear a turn for the worse in the economic situation. Interest rate expectations in Europe have thus been lowered in recent weeks. Our forecasts for the Norwegian economy have over a longer period been based on the assumption of weaker global developments than consensus forecasts. This view has been based on the expectation that the weaker developments we have observed in the US will gradually have a dampening impact on growth in Europe. Growth in Asia remains robust. We maintain our previous assumption of a moderate cyclical downturn ahead. This will normally lead to a fall in prices for typical Norwegian exports goods from today's very high levels, but the fall in export prices is not expected to be as pronounced as that observed in many previous downturns.