Country Report Norway September 2008

Outlook for 2008-09

• 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.
• Labour has a reasonable prospect of remaining in government after the 2009 election, most likely in a minority administration, although the chances of a centre-right government have improved since last year.
• Public spending on local government, health, education, research and environmental projects will increase as the government channels an increasing amount of oil wealth into the economy.
• With core inflation increasing, there remains a possibility that Norges Bank (the central bank) will opt for one final increase in official interest rates before the peak of the current tightening cycle is reached.
• Norway's economic upswing will moderate in 2008-09. Consumer spending will weaken as a result of higher inflation, higher interest rates and a cooling housing market. High oil prices will continue to support investment spending.

Monthly review

• New figures show that 95% of listed companies achieved the mid-2008 deadline for ensuring that women make up at least 40% of board members.
• An August opinion poll revealed a further drop in support for the governing parties. The poll predicts a majority for a Conservative-Progress coalition.
• Russia has suspended all military co-operation with NATO states, including Norway. However, joint coastguard exercises between Norway and Russia are expected to proceed as planned.
• The government has launched an action plan to simplify business reporting procedures, including an expansion of electronic reporting.
• Norges Bank kept its main policy interest rate unchanged at 5.75% following its Executive Board meeting on August 13th. The probability of a further increase remains finely balanced.
• Real GDP increased by 0.6% quarter on quarter in the second quarter of 2008, after stagnating in the first quarter. On a year-on-year basis, growth has softened in comparison with the second half of 2007.
• Manufacturing output growth remains strong. Construction activity also continued to expand, but services output increased only slightly.

Source: Country Report