Country Report Norway December 2008

Outlook for 2009-10

• The Economist Intelligence Unit's central forecast is that the "red-green" majority coalition of the Labour Party, the Socialist Left Party (SV) and the Centre Party will hold together until the general election in September 2009.
• 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.
• Labour has a reasonable prospect of remaining in government after the 2009 election, possibly as a minority administration. However, the chances of a centre-right government have improved since last year.
• Norges Bank (the central bank) is expected further to loosen monetary policy in late 2008 and 2009, following reductions in official interest rates in October.
• The krone is expected to regain some strength in 2009 following a sharp depreciation against both the euro and the dollar since September.
• 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 strong.

Monthly review

• The prime minister, Jens Stoltenberg, announced that Norway will transpose the EU's services directive into Norwegian law, despite the opposition of both the Centre Party and the SV.
• The government has chosen the American Joint Strike Fighter to replace its ageing F-16 fighter planes. The decision was a blow to the SV, which had favoured upgrading the existing fleet or choosing the Swedish JAS Gripen.
• October opinion polls showed a continued rise in support for the governing parties, suggesting that the public approves of Mr Stoltenberg's response to the financial crisis. Labour has once again emerged as the largest party.
• The government has promised an additional Nkr50bn (US$7bn) for the state export credit agency to ensure a flow of funds to Norwegian industry.
• The minister of finance, Kristin Halvorsen, has announced that the government is drawing up a fiscal stimulus package, which is expected to include measures to support local municipalities and the construction sector.
• The governor of Norges Bank, Svein Gjedrem, has hinted at deeper cuts in interest rates than the central bank had hitherto expected.
• Real GDP shrank by a seasonally adjusted 0.7% quarter on quarter in the third quarter. Forward-looking indicators point to a continued slowdown ahead.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;39
NAICS Code: 52;31