Norway’s economy will slow next year as exporters struggle to remain competitive amid falling demand from the debt-ridden euro area and currency gains, the country’s largest business group said.
Growth in Norway’s mainland economy, which excludes oil and gas revenue, will slow to 2.5 percent next year from 3.25 percent this year, the Oslo-based Confederation of Norwegian Enterprise, known locally as NHO, said in a report today. Total exports will remain unchanged in 2013 after growing 2 percent this year, NHO estimates.
Norwegian exporters, which sell more than 60 percent of their goods to the European Union, are fighting to stay competitive as demand in the euro area sags and the krone hovers close to a nine-year high, making exports more expensive. A boom in the country’s petroleum industry has boosted wages, increasing production costs.
Dag Aarnes, a director at the NHO, said there’s concern that an estimated record spending on the petroleum area is having “crowding out effects” on Norway’s traditional industry. Investments by non-petroleum related businesses have almost fallen by 50 percent to 5 billion kroner ($880 million) from more than 10 billion kroner in 2008, he said at a press conference today.
“In the last three recoveries, business investments have been characterized by annual growth rates of 10 to 20 percent,”NHO wrote in its report. “This isn’t happening this time.”
The krone has appreciated 5.2 percent against the euro so far this year and 5.5 percent against the dollar.
Norges Bank last month kept the main interest rate unchanged at 1.5 percent for a fourth meeting, following two cuts since December as it tries to limit krone gains. The bank has signaled it will keep its benchmark rate on hold at least until March, citing low inflation and falling interest rate expectations abroad.
Published: January 29, 2023