Norway: Still not quite like others
18 JANUARY 2012
The broad contours of our expectations for the Norwegian economy remain intact:
growth in overall GDP should accelerate to 2.1% in 2012
helped by a very stronginvestment cycle in the oil sector. However, relative to the latest Nordic Outlook, we havesliced our forecast for
growth in mainland GDP
– excluding oil/gas and shipping –
to2.4% in 2012
, marginally slower than in 2011, but
leave the 2013-forecast at 2.9%
While non-oil exports of goods slipped in late 2011, headwinds from abroad have beenmost visible in “soft” indicators. The manufacturing PMI has thus dropped markedly andconsumer confidence has declined to a below-trend level which on the face of it suggeststhat private consumption will continue to lag well behind very solid income growth.
Surging oil sector investment provides the Norwegian economy with
an “extra” demandimpulse
others are lacking. This should show up in a split in manufacturing with activityamong suppliers to the oil sector holding up well while producers of intermediate goodswill be hit by weakness at main export markets. The decline in non-petroleum exports inthe second half of 2011 is expected to carry over to early 2012.
Norges Bank made a surprisingly deep 50bps cut in its key deposit rate to 1.75% inDecember. SEB’s forecast is that the ECB will leave policy rates unchanged going forward.If so, Norges Bank should stay put as well, but should the ECB opt for cutting rates, a25bps rate cut at the mid-March monetary policy meeting cannot be ruled out.
Norway is in a
unique fiscal position
government surplus of NOK 373bn in2011 (some 13.5% of GDP) was NOK 106bn more than expected: higher income from theoil sector (higher prices) contributed a lot, but the non-oil budget deficit was 51bn lowerthan assumed on e.g. higher tax income. The 2012 budget puts the
governmentsurplus at 11.5% of GDP, leaving the government ample room to stimulate if needed.
Stein Bruun, +47 2108 8534, and Erica Blomgren, +47 2282 7277, SEB Norway
2010 2011 2012 2013
GDP 0.7 1.4 2.1 2.4Mainland GDP 1.9 2.5 2.4 2.9Unemployment
3.6 3.3 3.4 3.3Inflation 2.5 1.2 1.4 2.1Core inflation 1.4 0.9 1.5 2.0Government balance** 10.8 13.6 11.5
* Per cent of labour force, ** General government, per cent of GDP,forecast 2012 MoF (Oct. 2011)Source: SEB
Year-on-year percentage change
Growth should hold up rather well
Norwegian real GDP GDP mainland Norway
Source: Statistics Norway, SEB
03 04 05 06 07 08 09 10 11 12 13-3-2-10123456789-3-2-10123456789SEB forecast