Category: Financial / Investment
The government of the oil-rich Nordic country had expected the economy,
excluding activity from the oil and shipping sectors, to grow 3.1 percent in
2012, up from a forecast 2.8 percent growth in 2011.
“The government will cut the 2012 growth forecast for the Norwegian economy,”
Prime Minister Jens Stoltenberg told reporters on Tuesday, after meeting with
business and trade union leaders to discuss the European debt crisis and its
impact on Norway.
Stoltenberg did not say how much lower economic growth was projected to be,
nor did he say why the government was cutting its forecasts. The new forecast,
he said, would be presented in a forthcoming revised budget.
The Nordic nation of 4.9 million inhabitants is not a member of the European
Union, but its export-oriented industries are highly dependent on European
It survived the 2008 financial crisis relatively unscathed due to its booming
oil sector and a cushy budget surplus fuelled by its half-trillion-dollar
sovereign wealth fund but there have been signs that the latest global economic
turmoil are hurting Norway.
OUTLOOK HAS SLIGHTLY DETERIORATED
The head of the central bank said Norway’s growth outlook had deteriorated
since its last assessment in October, but that the changes had been slight and
that it was too early to revise official projections.
Øystein Olsen added that both positive and negative events have impacted the
global climate since October and more data would be required before the bank
made its next interest rate decision Dec. 14.
“I would resist any attempt to summarize the picture as a basis for future
interest rates,” Olsen said on the sideline of a conference.
“To summarize, on an ad hoc basis, the information we have received since
Oct. 19 has been slightly more negative than our projections.”
The bank’s key policy rate is 2.25 percent, and it has said last month it
could stay there “for a long while”. In a newspaper commentary on Monday, Olsen
said the bank was prepared to cut rates if funding for Norwegian banks were to
He said on Tuesday the European agreement to help Greece shoulder its debt load
was “positive,” but said Europe’s EFSF bailout fund needed more firepower to
stop the crisis spreading to Italy.
EURO-ZONE CRISIS TAKES TOLL
Earlier on Tuesday, the IMF said it saw growth of 2.5 percent in Norway’s
economy both this year and next. It said last year the Norwegian economy would
grow between 2.5 percent to 3 percent in 2011.
The Washington-based lender did not provide a reason for the lower forecast
but said Norway could suffer from turmoil in the euro zone.
“Severe (eurozone) stress would undoubtedly affect Norway via shaken consumer
confidence, lower exports to Europe, lower oil prices, and strains in
international interbank markets-a key funding source for Norway’s largest
banks,” it said in a statement.
The IMF also said Norway was at risk of a house price bubble due to rising
prices and high-level of household debt.
Norway’s economy excluding its flagship oil sector slowed in the third
quarter, the latest figures by the country’s statistics office showed on
Tuesday. ($1 = 5.8199 Norwegian crowns)
Published: July 6, 2022