Country Report Norway September 2009

Outlook for 2009-10

• Although the ruling centre-left coalition may lose its majority in the general election on September 14th, Jens Stoltenberg is expected to continue as prime minister at the head of a minority Labour administration.
• If the four opposition parties win a substantial majority, there is still a chance that a centre-right government could be formed, but the leaders will need to bury their differences and that will take time.
• The government's short-term economic policy priority is to manage the impact of the global economic and financial crisis by delivering a substantial fiscal stimulus and implementing measures to support access to financing.
• Norway's economy is partly shielded from weaker global conditions by its large petroleum sector, but the country will not avoid a downturn in 2009. Growth is forecast to rebound in 2010, led by strong private consumption.
• Following the latest cut in official interest rates in June, Norges Bank (the central bank) is expected to begin tightening monetary policy from December 2009, on the assumption that the incipient recovery continues.
• 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 election will be a close finish between the centre-left parties in the current government and the opposition parties, with opinion polls indicating a slight swing from left to right since the 2005 election.
• The Labour Party and the Progress Party have made the running in the final stages of the election, although the showing by the smaller parties will determine which coalitions are possible in the new parliament.
• The government has announced some changes to the investment team at Norges Bank that has responsibility for Norway's sovereign wealth fund. The changes are part of wider review of the fund's investment strategies.
• The government has announced plans for a state guarantee scheme worth Nkr20bn (US$3.3bn) to promote the use of long-term electricity contracts in the power-intensive industries.
• The latest national accounts show a return to growth in the second quarter of 2009. Whereas total real GDP continued to fall, dragged down by lower oil production, mainland GDP grew by 0.3% quarter on quarter.
• Recent economic indicators suggest that a sustained upturn in consumer spending is developing. The deterioration of the labour market has been much less bad than was feared at the start of 2009.

This report covers the following industry codes:
SIC Code: 60;70;1
NAICS Code: 52;72;11