Country Report Norway April 2009

Outlook for 2009-10

• The Economist Intelligence Unit's central forecast is that the present government will continue in power after the 2009 election, but a fall in the support for the two smaller coalition parties could jeopardise this prospect.
• The global financial crisis should strengthen the position of the current government, allowing it to portray planned increases in public spending as promoting social justice during the economic slowdown.
• In the event of a change of government, however, there would be only a slim majority for the four opposition parties, which might well be unable to agree on a coalition.
• Norway's economy is partly shielded from weaker global conditions by its large petroleum sector, but the country will not avoid a sharp downturn in 2009. External and budget balances will remain comfortably in surplus.
• Norges Bank (the central bank) is expected to loosen monetary policy further in 2009, following the latest reductions in official interest rates in March.
• The Norwegian krone is expected to regain some strength in 2009 following a sharp depreciation against both the euro and the US dollar in the final months of 2008.

Monthly review

• The Progress Party has improved its position in the polls after claiming that there was a process of creeping "Islamification" of Norwegian society.
• The government has announced a new National Transport Plan with a big increase in expenditure on the countrys infrastructure.
• The government has presented new legislation to tighten up the management and control systems at Norges Bank.
• The Government Pension FundGlobal recorded losses of Nkr663bn (US$101bn) on its foreign assets in 2008.
• The government has launched a comprehensive review of the Fund's active management strategies. Proposed changes to the ethical guidelines that govern investment decisions could include a stronger environmental focus.
• Norges Bank lowered its key policy interest rate, the sight deposit rate, by 50basis points, to 2%, on March 25th. Norges Bank has also signalled its intention to reduce the policy rate to 1% later in 2009.
• A new pay deal provides for a general private-sector wage increase of 3.6% in 2009, down from 5.6% in 2008. Real wage growth remains strongly positive. Norways current-account surplus was equivalent to 18% of GDP in 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52