En Srv 44 Cntnt En trnd 3 Ieaioa ackgou 4 owegia ecoomy 7 •eeomes us a is yea 7 •Ouook 9 En pl lndr 4 1 Adn Cppln nd l Mrtn Stln: rtn lbr rt bln 2 rh pbltn n Enlh 3 h t ff dt fr nfrtn d n th pbltn 6 br 4. Iquiies sou e iece o Ku Mou o Mee oa En Srv Edtrl brd: Oa eko (e Ku Ase uie Asakse Åe Caee Soeig Gomso Ku Mou o Skogu Edtrl tnt: Wece wi c 9 7 eea 11 1 3 n: Eo ige esig rnt: ac uigykk Edtrl dr: Sais- ics oway eseac ea rtme O o 1 31 e -33 Oso Sl nd brptn rv: O o 1 31 e -33 Oso e 9 eea 9 7 En Srv is uise ou imes a yea y e eseac eame o Saisics oway e eseac eame was esaise i 195 e eame as aou 9-1 emoyees (e 199 e eseac eame is oay ogaie i ou iisios ea o eame is Olv jrhlt. • iisio o uic Ecoomics • Macoecoomic iisio rtr f rh l Mrtn Stln rtr f rh Adn Cppln - uic ecoomics aes - usiess cyce aaysis - aou make aaysis - Macoecoomic moes - Mico simuaio moes - Geea equiiium moes • aua esouces iisio • Micoecoomeic iisio rtr f rh Knt . Alfn rtr f rh ørn An - Eiomea ecoomics - Cosume a ouce eaiou - Ieaioa eegy makes - Icome isiuio aaysis - eoeum a eegy aaysis - Ecoomeic meos Sbl n bl Sbl aa o aaiae o o uicaio i 0 oisioa o eimiay igue Economic Survey 4/94 Economic trends En trnd Preliminary third-quarter national accounts figures strengt- the likelihood of a further decline in interest rates in hen the impression that 1994 will be a year of pronounced Europe. The stimulus from interest rate movements to expansion in the Norwegian economy. It is now likely that growth in household purchases of goods and services will mainland output will increase by about 3.5 per cent, with thus be substantially reduced in the period ahead. Recent total GDP growing at an even higher rate. Growth rates of estimates indicate that the projected decline in oil invest- this magnitude have not been recorded since the mid- ments may be delayed to some extent. As a result of 1980s. changes in the composition of demand, with a shift to- wards higher imports, developments in these investments As was the case during the boom in 1984-1986, changes in will probably tend to reduce output growth in the Norwe- financial markets have again generated the strongest gian economy in 1995. The fiscal programme will also, to impetus to growth in the level of activity. However, while a greater extent than in 1994, curb demand next year, the upturn in the mid-1980s was associated with a sharp among other things as a result of the proposed increase in rise in lending following the phasing out of credit ratio- VAT and other planned austerity measures. Nor is it incon- ning, the driving force has now been a general decline in ceivable that Swedish and Finnish membership in the EU, interest rates in Europe. with Norway outside, can have a dampening effect on in- vestment in parts of the business sector, even with a conti- The fall in interest rates through 1993 and into 1994 quick- nuation of the current EEA Agreement. ly translated into higher demand from Norwegian house- holds. The upswing in other European countries has also Higher VAT and a further decline in unemployment will gradually contributed to resumed growth in markets for push up price inflation slightly next year, to a level on a Norwegian export goods, and all indicators point to record par with Germany (west), but still lower than the average growth in traditional merchandise exports this year. It appe- of Norway's main trading partners. The rise in price infla- ars that oil investments are being maintained at a higher tion next year must also be viewed against the background level than previously expected, thereby contributing to of the particularly low inflation in 1994, which is partly such a strong upturn in the Norwegian economy in 1994. ascribable to the effect of interest rate reductions on rents through last year and into 1994. The relatively sharp growth in output this year will result in a rise in employment for the first time since 1987. Even The upturn in the Norwegian economy and developments though the supply of labour is also increasing, it appears in the labour market indicate a pronounced reducticin in de- that unemployment will fall by about half a percentage ficits on public sector budgets. This also applies to the point on an annual basis. Price inflation will nevertheless planned reorientation of fiscal policy in 1995. There is rea- be record low, and the current-account surplus is likely to son to assume that growth in oil production and decline in be a good 3 per cent of GDP. central government oil investments will result in a further improvement in public finances in the years ahead. The upswing in the Norwegian economy will probably slow in 1995, and the growth rates for demand and output in mainland Norway may be 1-1 1/2 percentage points G growth, Norway and European Community (EC) lower than this year. This will bring growth in the Norwe- Annual rates gian economy more in line with the average of our main 6 trading partners. 5 Even though growth abroad will probably be slightly stronger next year than in 1994, shifts in demand may - result in weaker growth in Norwegian exports. Further up- ward revisions in growth projections for Germany reduce 3- z Mn ndtr fr th rn n Gow om eious yea e ce i 1993 199 1995 0 G 3 5 2.6 iae cosumio 17 7 7 -1 , Uemoyme ae l) 6.0 5 5 191 193 195 197 199 1991 1993 1995 Cosume ice ie 3 1 2.6 -E- EC Norway 1 ee i e ce Source: Statistics Norway, OECD and Consensus Forecasts. 3 Economic trends Economic Survey 4/94 Intrntnl brnd The outlook for economic developments in the OECD area liberalisation of international trade, and US ratification is remains bright. In Anglo-Saxon industrial countries, with expected to have a bearing on approval by other countries. the US leading the way, economic growth remains high, The Federal Reserve has continued its progressive tighten- while activity in continental Europe has picked up marked- ing of monetary policy; the Federal funds rate has been ly the past year. GDP is likely to expand by about 2 1/2 per raised in six steps since February this year, from 3 to 5.5 cent in EU countries this year, compared with a decline of per cent. The increases in interest rates have been motiva- 0.4 per cent from 1992 to 1993. The forecasts point to a ted by the growing risk of inflation as a result of relatively further rise in growth, to nearly 3 per cent next year. As a strong economic growth. Thus far this year, however, the result of sluggish production trends, unemployment rose upturn in the US has not had a strong impact on the con- sharply in many countries in western Europe last year. sumer price index, which rose by 2.6 per cent in the twelve Even though economic activity is projected to increase in months to October this year. Nevertheless the fear of the period ahead, unemployment is not expected to decline higher inflation has probably been a factor contributing to to any great extent in these countries. The forecasts indi- the pronounced rise in long-term interest rates over the cate unemployment of 10.9 per cent in EU countries in past year, to nearly 8 per cent at end-November. The rise 1994, edging down to 10.4 per cent next year. Inflation in in interest rates is expected to have a dampening effect on EU countries is expected to be reduced to a little less than GDP growth in 1995. 3 per cent in 1995. In Japan, preliminary national accounts figures show that Preliminary third-quarter national accounts figures for the GDP expanded by 0.9 per cent between the second and US show that GDP expanded at an annual rate of 3.9 per third quarter of 1994 after having increased by 0.2 per cent cent from the previous quarter. This was higher than expec- in the previous quarter. Private consumption and housing ted even though growth was slightly lower than in the investment made the strongest contribution to growth. second quarter (4.1 per cent). The expansion was primarily Available short-term data for October and November pro- fuelled by private and public consumption, stockbuilding vide a slightly mixed picture of the economic situation, but and non-residential investment, while net exports had a there are many indications that the recovery is not yet firm- dampening effect. The high growth has resulted in a 1.1 ly established. The recession is largely related to a sharp percentage point decline in unemployment since the begin- fall in private investment following several years of overin- ning of the year, reaching 5.6 per cent in November. vestment and inflated property and asset prices. The de- Strong domestic demand in the US combined with the cline in household income as a result of lower bonus pay- recession in traditionally important trade areas have contri- ments and rising unemployment has amplified the negative buted to a negative trend in the external account.