Country Report Norway February 2009

Outlook for 2009-10

• There is now little risk that the "red-green" majority coalition of the Labour Party, the Socialist Left Party (SV) and the Centre Party will disintegrate ahead of 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.
• The Economist Intelligence Unit's central forecast is that the present government will continue in power after the 2009 election.
• However, current polls still project a slim majority for the four opposition parties, meaning that a centre-right government could still come to power providing that the parties can overcome their differences.
• 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 February.
• The krone is expected to regain some strength in 2009 following a sharp depreciation against both the euro and the dollar in the final months of 2008.

Monthly review

• The government has presented a Nkr20bn (US$2.9bn) fiscal stimulus package in a bid to limit an anticipated rise in unemployment and bolster public support ahead of the election. Polls show a continued rise in Labour's support.
• The leader of the opposition Conservatives, Erna Solberg, appeared to suggest that she would prefer to form a coalition with the Liberals and Christian Democrats if the current government is not re-elected.
• The government's supplementary budget foresees a fiscal stimulus, as measured by the increase in the structural non-oil deficit, of 2.3 percentage points of mainland GDP in 2009.
• In addition to an additional Nkr16.75bn in public spending in 2009, the fiscal stimulus package includes Nkr3.25bn of tax relief for the corporate sector.
• Norges Bank’s survey of bank lending for the fourth quarter of 2008 shows both a tightening of credit standards and a decline in credit demand from both households and the non-financial corporate sector.
• Statistics Norway’s latest business tendency survey paints a bleak picture of economic activity for the months ahead in most areas of manufacturing.

Source: Country Report

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