Economic trends for Norway and abroad

Moderate growth next year

Published:

New figures from the quarterly national accounts indicate a slight upturn in the Norwegian economy in the third quarter, following near zero growth through the previous four quarters. Activity is expected to grow moderately next year and more strongly in 2001. Unemployment will probably increase somewhat, but will still be extremely low by European standards.

Seasonally adjusted figures from the quarterly national accounts show a third quarter upturn in several sectors of the Norwegian economy. Both production and demand in the mainland economy increased, following near zero growth in the previous four quarters. In addition to Mainland Norway showing a third quarter rise in demand, the figures for the first and second quarters have been adjusted slightly upwards. Consequently, growth in the mainland economy this year could be stronger than previously estimated, although it will still be considerably weaker than in the previous five years.

Employment has changed little so far this year, and on an annual basis employment will be about the same as last year. Growth in consumer prices will be the same as in 1998, but wage growth appears to be somewhat lower. A pronounced drop in imports and a sharp increase in oil prices have caused the current account balance to show a substantial surplus once again, and over the past nine months the Norwegian krone has basically stayed within the target zone vis-à-vis the euro.

Statistic Norways prognoses for the next two years means that the third quarter trend this year cannot be interpreted as the start of a new sharp upturn for the Norwegian economy. It rather indicates moderate but increasing growth through the next two years, which can best be characterized as an extremely soft landing. Due to continued decreases in petroleum investments further declines in parts of the manufacturing sector are in the pipeline, followed by more normal growth in other parts of the mainland economy.

With an estimated stronger productivity growth in the Norwegian economy in the next two years compared with the past three years, the outlook is for modest growth in employment. Employment could edge upwards, while wage growth, inflation and interest rates are expected to decrease towards the level of the euro countries. Norways current account surpluses will be large and increase over the next two years, even with a clear decline in the price of oil compared with the current high level.

Main economic indicators 1998-2001. Accounts and
forecasts. Percentage change from previous year unless
otherwise noted
 
  Accounts Forecasts
  1998 1999 2000 2001
 
Demand and output        
Consumption in households and non-profit organizations 3.1 2.0 2.8 3.0
General government consumption 3.7 1.9 1.6 1.6
Gross fixed investment 8.1 -7.6 -6.9 1.4
petroleum activities 25.7 -11.4 -23.6 -4.8
mainland Norway 2.4 -5.4 0.0 3.1
firms 2.8 -6.5 -2.2 0.5
housing -0.6 -3.1 10.1 13.5
general government 3.4 -4.0 -1.6 2.0
Demand from mainland Norway 1 3.1 0.5 2.0 2.7
Stockbuilding 2 0.9 0.0 0.0 0.0
Exports 0.5 -0.6 8.5 6.0
crude oil and natural gas -3.8 -1.5 15.6 8.8
traditional goods 3.4 1.6 4.9 4.6
Imports 9.1 -3.4 0.8 4.1
traditional goods 9.6 -2.5 2.8 5.3
Gross domestic product 2.1 0.6 3.3 3.2
mainland Norway 3.3 0.8 1.3 2.2
Labour market        
Employed persons 2.3 0.2 0.0 0.3
Unemployment rate (level) 3.2 3.2 3.5 3.6
Prices and wages        
Wages per standard man-year 6.5 5.0 3.6 3.1
Consumer price index 2.3 2.3 2.1 1.9
Export prices, traditional goods 1.0 -0.1 3.3 1.7
Import prices, traditional goods 1.3 -2.0 1.7 0.8
Real prices, dwellings 6.6 6.6 6.8 8.6
Balance of payment        
Current balance (bill. NOK) -16.3 33.5 98.0 116.5
Current balance (per cent of GDP) -1.5 2.8 7.8 8.9
Memorandum items:        
Household saving ratio 6.6 7.0 7.3 6.9
Money market rate (level) 5.7 6.4 5.2 4.7
Average borrowing rate (level) 3 7.4 8.5 7.4 6.9
Crude oil price NOK (level) 4 96.0 140.3 151.2 142.5
International market growth 7.1 5.4 6.4 6.1
Importweighted krone exchange rate 5 4.5 0.6 -0.5 -0.4
 
1   Consumption in households and non-profit organizations + general government + gross fixed capital formation in mainland Norway.
2   Change in stockbuilding. Per cent of GDP.
3   Households' borrowing rate in private financial institutions.
4   Average, Norwegian oil production.
5   Increasing index implies depreciation.