Country Report Norway July 2009

Outlook for 2009-10

• The Economist Intelligence Unit's central forecast is that the present government will continue in power after the election on September 14th, but the three ruling parties need to recover some support before then.
• 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 that the government loses its majority, the four opposition parties might well be unable to agree on a coalition, leading to a minority government of the left or right.
• 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.
• Following the latest cut in official interest rates in June, Norges Bank (the central bank) is expected to refrain from further reductions in 2009.
• The Norwegian krone is expected to regain some strength in the second half of 2009, although short-term volatility cannot be ruled out.

Monthly review

• The threat of a strike in the public sector persuaded the government to postpone changes in public-sector pensions until 2011.
• Recent opinion polls showed two of the governing parties, Labour and the Socialist Left Party (SV), gradually increasing their support, although the third coalition partner, the Centre Party, has again seen a fall in its poll ratings.
• In mid-June Norges Bank cut its main intervention rate, the sight deposit rate, to an all-time low of 1.25%. The central bank has indicated that it expects to start tightening monetary policy by the second quarter of 2010.
• Norske Shell, a petroleum company, has announced what may prove to be a significant gas discovery at the ???Gro??? prospect in the Norwegian Sea.
• Statistics Norway has revised upwards the expected nominal value of investments in oil and gas activity in 2009.
• The Norwegian government has said that it will contribute Nkr1bn (???140m) to EU funds over the next five years to help finance carbon capture and storage (CCS) projects.
• Consumer confidence in Norway rose to an 18-month high in June. The rise in unemployment has so far been less severe than was widely anticipated at the beginning of the year. Manufacturing output continues to fall.

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