Country Report Norway January 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 majority for the opposition parties, meaning that the Progress Party and the Conservatives could form a centre-right government if they can secure the backing of the small centrist parties.
• 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 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 in the final months of 2008.

Monthly review

• Having already outlined an expansionary budget for 2009, the government is expected to unveil an additional stimulus package in late January. The delay in producing its crisis package has been criticised by the Progress Party.
• Opinion polls in December suggest that the governing parties have consolidated the recent recovery in their ratings, implying that the Norwegian electorate approves of the government's response to the financial crisis.
• Norges Bank (the central bank) slashed official interest rates at its final meeting of 2008, with the sight deposit rate falling by 175 basis points to 3%.
• Norges Bank's latest Financial Stability Report, which was published in December, notes that Norwegian banks have weathered the credit crunch well so far. However, the Bank warns that loan losses will rise sharply.
• The latest investment intentions survey shows a rise in planned investments in oil and gas activity in 2009, but the outlook is becoming much less certain.
• Retails sales growth turned negative in October. The decline of house prices is accelerating. The unemployment rate edged up to 2.7% in October.

This report covers the following industry codes:
SIC Code: 65;60
NAICS Code: 53;52

This report covers the following industry codes:
SIC Code: 65;60
NAICS Code: 53;52