A moderate cyclical upturn in the Norwegian economy in the second half of 2010 is expected to be replaced by slightly higher growth, according to predictions from Statistics Norway (SSB).(Photo: Norway's Central Bank)
SSB says greater domestic demand is driving the upturn, while the growth impetus from abroad is expected to be modest in the next few years. The cyclical upturn in the economy is likely to contribute to a fall in unemployment in the next few years. Wage growth will increase, but interest rates and underlying inflation will also rise.
Based on a balancing of stability in inflation and the real economy, SSB expect the base rate to be raised by 0.25 percentage points each quarter from June 2011 until the end of the projection period. The money market rate is expected to change roughly in line with the base rate, and to exceed 6 per cent by the end of 2014. The average interest on loans in the banks is thus expected to reach 7.5 per cent.
A strong import growth among Norway’s trading partners in 2010 helped push Norwegian exports up. When the growth from abroad is reduced and Norwegian cost-related competitive power is weakened, traditional exports will experience moderate growth in the period ahead. Towards the end of the projection period, higher growth in the global economy is expected to play a role in pushing Norwegian exports up further, SSB states.
The upturn in the economy will subsequently play a role in the employment growth increasing to such an extent that unemployment will start to fall. In 2014, unemployment is expected to fall to 2.5 per cent of the workforce.
Wage growth in 2011 is expected to be the same as in 2010; 3.6 per cent. A more restrictive labour market and improvement in profitability in industry will subsequently lead to increased wage growth. In 2014, wage growth is expected to reach in the region of six per cent, SSB predicts.
(NRK/SSB)
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