outlook for the norwegian economy · solid growth in the norwegian economy-4-2 0 2 4 6 8 2005 2007...
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OUTLOOK FOR THE NORWEGIAN
ECONOMYGOVERNOR ØYSTEIN OLSEN
Bergen Chamber of Commerce and Industry,
25 October 2019
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The Executive Board's assessment and
interest rate forecast
The Executive Board decided in
September to raise the policy rate to
1.5%.
At its meeting in October, the Executive
Board decided to keep the policy rate
unchanged.
The Executive Board´s current
assessment of the outlook and
balances of risks suggest that the policy
rate will mostly remain at this level in
the coming period.
2Source: Norges Bank
0
1
2
3
4
5
6
7
8
2005 2008 2011 2014 2017 2020
Policy rate with forecast from Monetary Policy Report 3/19
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Agenda
1. Global challenges
2. What about Norway?
3. Lessons learned
33
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1. Global challenges
44
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Trade tensions weigh on the outlookGlobal industrial production and trade. Volume
5Source: CPB World Trade Monitor
-6
-1
4
9
2012 2013 2014 2015 2016 2017 2018 2019
Trade
Industrial production
Exports Singapore
5
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Heightened uncertaintiesGlobal PMI
Sources: CPB, Thomson Reuters and Norges Bank 6
47
49
51
53
55
2014 2016 2018
Manufacturing PMI
Services PMI
New export orders,manufacturing PMI
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Low global interest ratesYields on 10-year government bonds . Percent
7Sources: Bloomberg and Norges Bank
-1
0
1
2
3
4
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19
US
Germany
Sweden
Norway
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Low policy ratesPolicy rates and estimated forward rates1). 22 October 2019. Percent
81) OIS rates.
Sources: Bloomberg, Thomson Reuters and Norges Bank
-1
-0.5
0
0.5
1
1.5
2
2.5
3
2015 2016 2017 2018 2019 2020 2021 2022
US
Euro area
Sweden
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Oil price, spot and futuresUSD per barrel Brent Blend
9Sources: Thomson Reuters and Norges Bank
0
20
40
60
80
100
120
140
2013 2015 2017 2019 2021
Oil price
Futures 18 October 2019
Futures MPR 3/19
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The krone exchange rate is affected by
global uncertaintyImport-weighted exchange rate index (I-44)
10Source: Norges Bank
101
103
105
107
109
111
Sep-18 Dec-18 Mar-19 Jun-19 Sep-19
I-44
Average for Q4 to date
Projection for Q4 MPR 3/19
Stronger NOK
MPR 3/19
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NOK against other currenciesPercentage movement. 13 September – 18 October 2019
Sources: Bloomberg and Norges Bank 11
-6.3 %
-3.3 %
-2.7 %
-2.6 %
-2.3 %
-2.2 %
-1.9 %
-1.4 %
-8% -6% -4% -2% 0% 2%
GBP
CAD
I44
EUR
USD
NZD
SEK
AUD
Weaker krone
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2. What about Norway?
12
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Solid growth in the Norwegian economy
-4
-2
0
2
4
6
8
2005 2007 2009 2011 2013 2015 2017 2019
Mainland GDP
Regional Network indicator
Four-quarter change. Percent
Sources: Statistics Norway and Norges Bank 13
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Unemployment has fallen
0
1
2
3
4
5
6
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Entire country
Oil-dependentregions
Hordaland
Unemployed as a percentage of the labour force. Seasonally adjusted
14Sources: Norwegian Labour and Welfare Administration (NAV) and Norges Bank
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Inflation is close to the targetTwelve-month change. Percent
15Sources: Statistics Norway and Norges Bank
0
1
2
3
4
5
2010 2012 2014 2016 2018 2020 2022
CPI
CPI-ATE
Inflation target
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House prices are at a high level …Index. 1998 Q4 = 100
Sources: Eiendomsverdi, Finn.no, Norwegian Association of Real Estate Agents (NEF), Real Estate Norway, Statistics
Norway and Norges Bank
50
100
150
200
1983 1989 1995 2001 2007 2013 2019
Crises
House prices/disposableincome
House prices/disposable income per capita ( aged 15–74)
16
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… but house price inflation is moderateHouse prices. Percentage change
Sources: Eiendomsverdi, Finn.no, Real Estate Norway and Norges Bank
-2
-1
0
1
2
3
-10
-5
0
5
10
15
2014 2015 2017 2018
Seasonally adjustedmonthly change (l.h.s.)
Twelve-month change(r.h.s.)
17
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3. Lessons learned
1. Floating exchange rate – a shock absorber
2. Financial stability considerations cannot be neglected
3. Inflation targeting must be flexible
18
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Interest rate decision – in a nutshellMPR 3/19
The policy rate
has been
raised to 1.5%
More people
in work
Inflation close
to target
Trade tensions
create
uncertainty
Policy rate
likely kept on
hold in the
near term
Most
households
better off
19
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OUTLOOK FOR THE NORWEGIAN
ECONOMYGOVERNOR ØYSTEIN OLSEN
Bergen Chamber of Commerce and Industry,
25 October 2019