Economic Survey 4-2004

The Norwegian economy passed a cyclical trough in the first half of 2003 and has since experienced a pronounced upturn. The upswing has primarily been supported by the shift in the monetary stance in 2003 and to some extent by an increase in petroleum investment. In line with previous analyses, the Norwegian economy is projected to come above trend in early 2005. Our projections for growth in the mainland economy in 2005 have been revised up somewhat in relation to previous projections because new information from oil companies indicates sharp growth in oil investment in 2005. With continued monetary and fiscal stimulus, combined with moderate, albeit decelerating growth among our trading partners, the cyclical expansion in the Norwegian economy may continue throughout 2005. Our growth projections for 2005 and 2006 imply that the boom will not be as pronounced as towards the end of the 1990s. Nevertheless, it is worth recalling that Statistics Norway, like most forecasting institutions, underestimated the amplitude of the upturn at that time, particularly through 1997. This may also prove to be the case this time since so many of the driving forces in the economy are pulling in the same direction.