Norway

RGE's Q1 2010 Norway Outlook

Norway’s economy contracted less than those of its Nordic neighbors in 2009. The country’s large petroleum sector has cushioned the downturn, allowing for a highly expansive fiscal policy. Continued investment in the petroleum industry has supported the mainland economy (excluding oil, gas and shipping), which grew by 0.5% q/q in Q3, the second straight quarter of growth. Norway’s two rate hikes in late 2009 highlight the country’s exceptional economic situation at a time when most central banks are still waiting to begin the tightening cycle. Going forward, higher interest rates, lower public spending and lower investment, together with weakening competitiveness, will weigh on growth. However, 2010 still looks to be a relatively strong year for Norway, owing primarily to private consumption.

High nominal wage increases, low inflation, public cash transfers and rising asset prices have supported private consumption, which grew by more than 1% q/q in both Q2 and Q3 2009. More than 90% of mortgages in Norway have variable interest rates. Thus, record-low interest rates resulted in lower mortgage payments and...

Read the Q1 2010 Norway Outlook.