Wiith the prospect of growth above trend in the mainland economy in 2011 and a stabilization of unemployment, the Norwegian Government proposes a budget for 2011 with a structural, non-oil deficit of NOK 128 billion - on par with the 2010 deficit in real terms. (Photo: Finance Minister Sigbjørn Johnsen)
In the proposal, the use of petroleum revenues is brought closer to the 4 per cent path of the fiscal policy guidelines, with an estimated excess spending of NOK 7.4 billion, down from more than NOK 19 billion in 2010. The proposed budget implies a fiscal tightening of 0.2 per cent of Mainland Norway trend-GDP from 2010 to 2011.
The Government states that several targeted policy measures helped softening the effects of the international financial crisis on the Norwegian economy. Following a decline in mainland output of 1.4 per cent in 2009, growth in the Mainland economy is now forecast at 1.7 per cent in 2010 and 3.1 per cent in 2011, the latter about half a percentage point above trend growth. Unemployment has been kept at low levels throughout the downturn and is forecast at 3½ per cent both in 2010 and 2011.
Norwegian financial institutions have generally performed better during the recent financial crisis than institutions in many other countries. Lessons learned from the Norwegian banking crisis in the early 1990's have made Norway well prepared for new crises in the financial markets. Moreover, Norway has a body of rules and supervision that covers the entire financial market. The “same risk, same regulation” principle has governed Norway’s approach to regulation and supervision. The financial institutions in Norway had low exposure to toxic assets at the beginning of the recent crisis.
The Norwegian economy has performed better than most other industrialised countries during the financial crisis. Following a downturn in the second half of 2008 and into 2009, economic activity picked up in the second quarter of 2009. The performance of the economy so far this year has been somewhat weaker than expected, but several indicators suggest that growth will pick up ahead. Increased consumer confidence, low interest rates and low unemployment point to higher private consumption. Improved outlook for our main trading partners suggests higher exports of traditional goods both this year and next. Gross fixed investments, both in the mainland economy and in the petroleum sector, are also expected to pick up next year.
Mainland economy is forecast to grow by 1.7 per cent in 2010 and by 3.1 per cent in 2011, the latter about half a percentage point above trend growth.
The outlook for the labour market has improved, and developments in the past few months, along with the positive outlook for the economy suggest an unemployment rate of 3½ per cent both in 2010 and 2011. This is lower than the average of the past 20 years which is 4¼ per cent, and also very low in an international context.
(NRK/Press release)
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