Country Report Norway March 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 there is a risk that it will fail to do so, especially if the Centre Party does not win 4% of vote.
• 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 February.
• 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

• Divisions have emerged in the Conservative Party, one of the two main opposition parties, over how much to co-operate with the government or with other opposition parties.
• The Centre Party, the smallest member of the three-party coalition government, has lost support and could fall below the 4% threshold for proportional representation in parliament.
• Two new funds have been set up. The State Finance Fund is to provide capital for banks, subject to conditions on remuneration of employees. The State Bond Fund will buy bonds in companies.
• Mainland GDP growth turned slightly negative in the fourth quarter, but remained stronger than in most of western Europe.
• Household incomes increased by 3.2% year on year in the fourth quarter, reflecting higher earnings and property income. This suggests that household income and wealth were not major constraints on private consumption.
• The banking sector's profits have fallen significantly, but remain positive. Loan losses totalled Nkr4.5bn (US$660m) in the fourth quarter, one of the highest figures on record.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;20
NAICS Code: 52;311