Norway’s strong, oil-fueled economy looks set to stay that way in 2013, according to the country’s biggest bank, DNB. Its analysts and economists predict low interest rates, another rise in consumption and more economic growth throughout next year.
The growth rate may be slower, at 2.4 percent instead of this year’s 3.5 percent, but that will still lead to what the Norwegians call continued velstand (prosperity).
‘Careful upturn’ abroad
Øystein Dørum, chief economist at DNB, tied that to signs of recovery in both Europe and the US. DNB’s analysts think that this year’s economic downturn of 0.4 percent in Europe will turn into a “careful upturn” of 0.3 percent in economic growth. In the US, the numbers also look better, and the bank is taking an optimistic view, predicting growth of around 2.6 percent.
Kyrre Aamdal, senior economist in DNB Markets, said the slower growth predicted for the Norwegian economy is based on two main factors: “For one thing, we expect lower investment in the oil sector,” Aamdal told reporters when presenting DNB’s prognosis for 2013. “At the same time, export firms will feel the effects of the strong krone, and that the economy in Europe is still weak.” Around 80 percent of Norwegian exports go to countries in the European Union (EU), which long has ranked as Norway’s biggest trading partner.
Aamdal doesn’t forecast any “shopping sprees” for Norwegians next year, but does think consumption will rise by around 3 percent. He thinks pay growth will rise by around 4 percent again, a bit lower than this year.
Interest rates to stay low
Norway’s central bank, Norges Bank, already has signaled that its executive board is unlikely to raise interest rates before March at the earliest, which means they’ll remain at record low levels, currently 1.5 percent for the bank’s key lending rate. DNB thinks rates will remain unchanged all year long, to help prevent Norway’s currency from getting even stronger than it already is.
“Even though there’s strong growth in both housing prices and home loans, Norges Bank doesn’t have much room when it comes to adjusting interest rates,” Aamdal told news bureau NTB. “Slightly lower economic growth allows them to keep the rates so low.”