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
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
Agenda
1. Global challenges
2. What about Norway?
3. Lessons learned
33
1. Global challenges
44
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
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
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
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
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
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
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
2. What about Norway?
12
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
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
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
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
… 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
3. Lessons learned
1. Floating exchange rate – a shock absorber
2. Financial stability considerations cannot be neglected
3. Inflation targeting must be flexible
18
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
OUTLOOK FOR THE NORWEGIAN
ECONOMYGOVERNOR ØYSTEIN OLSEN
Bergen Chamber of Commerce and Industry,
25 October 2019