Outlook for the Norwegian Economy
Deputy Governor Jan F. Qvigstad
Sparebank 1, Fredrikstad
4 November 2009
Inflation
  Moving 10-year average1) and variation2) in CPI3). Per cent. 1980 – 2009

  14                                ...
Credit risk for selected                                          Money market
banks                                      ...
Indicator of world                                          Manufacturing in OECD
 trade1)                                ...
International equity markets
Equity prices                        Implied volatility
Index, 1 January 2007 = 100.         ...
Oil price (Brent Blend) Commodity prices
In USD per barrel.                          In USD. Index.
Spot and futures price...
Spare capacity in                          Crude oil and refined
OPEC                                       product invent...
Key rates and estimated forward rates as at
  22 October 20091)
  Per cent. 1 June 2007 – 31 December 20122)
 7           ...
Effective exchange rates1)
 Index, week 1 2000 = 100. Weekly figures. Week 1 2000 – week 43 2009
  160                    ...
GDP growth
Growth on previous quarter. Seasonally adjusted. Per cent.
2007 Q1 – 2010 Q4
2                                 ...
Countercyclical policy using unconventional
measures
 expansionary fiscal policy
 low key rate
 extraordinary monetary pol...
Unwinding the extraordinary measures

 In recent months Norges Bank has
   not supplied NOK liquidity through FX swaps
   ...
Petroleum investment
At constant 2006-prices. In billions of NOK. 1983 – 2012

140                                        ...
Real exchange rate
Deviation from mean over the period 1970 – 2008.
Per cent. 1970 – 20091)
 20                           ...
Bank credit standards for enterprises and
   households
   Change in credit standards since previous period1). 2007 Q4 – 2...
Household credit from domestic sources1)
and house prices
12-month change. Per cent. January 2002 – October 2009
25       ...
Household expectations
  Net figures. Quarterly figures. 1992 Q4 – 2009 Q3
  40                                           ...
Structural non-oil deficit and expected return
on the Government Pension Fund – Global
In billions of 2010-NOK. 2007 – 201...
LFS unemployment as percentage of labour
force
Annual figures. 1971 – 2010. Projections are shown by broken lines

14     ...
Unemployment in Norway
As percentage of labour force. Seasonally adjusted.
January 2002 – October 2009
 6                 ...
Annual wage growth and LFS unemployment
Per cent. 1993 – 2010
8                                                           ...
Inflation
12-month change. Per cent. January 2006 – December 2012
 7.5                                                    ...
Projected key policy rate in baseline
scenario with fan chart
Quarterly figures. Per cent. 2007 Q1 – 2012 Q4
9            ...
Outlook for the Norwegian Economy
Deputy Governor Jan F. Qvigstad
Sparebank 1, Fredrikstad
4 November 2009
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Outlook for the Norwegian Economy

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Deputy Governor Jan F. Qvigstad
SpareBank 1, Fredrikstad
4 November 2009

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Outlook for the Norwegian Economy

  1. 1. Outlook for the Norwegian Economy Deputy Governor Jan F. Qvigstad Sparebank 1, Fredrikstad 4 November 2009
  2. 2. Inflation Moving 10-year average1) and variation2) in CPI3). Per cent. 1980 – 2009 14 14 12 12 CPI Inflation target 10 10 8 8 6 6 4 4 2 2 0 0 1980 1985 1990 1995 2000 2005 1) The moving average is calculated 7 years back and 2 years ahead Sources: Statistics Norway and Norges Bank 2) The band around the CPI is the variation in the CPI adjusted for tax changes and excluding energy products in the average period, measured by +/- one standard deviation 3) Estimate based on projections for 2009 – 2011 from Monetary Policy Report 3/09 2
  3. 3. Credit risk for selected Money market banks spreads1) Measured by CDS spreads. Basis 5-day moving average. Percentage points. points. 5 January 2007 – 22 October 2009 1 January 2007 – 22 October 2009 700 700 4 4 Citigroup Norway 2) 600 JP Morgan 600 US 3 Euro area 3 500 500 400 400 2 2 300 300 200 200 1 1 100 100 0 0 0 0 Jan-07 Oct-07 Jul-08 Apr-09 Jan-07 Oct-07 Jul-08 Apr-09 1) Spread between 3-month money market rate and market key rate expectations 2) Norges Bank’s projections Sources: Bloomberg, Thomson Reuters and Norges Bank 3
  4. 4. Indicator of world Manufacturing in OECD trade1) and emerging markets Index, January 2002 = 100. 12-month change. Per cent. January 2002 – August 2009 January 2002 – August 2009 300 300 25 25 20 20 250 250 15 15 10 10 200 200 5 5 150 150 0 0 -5 -5 100 100 -10 OECD -10 Eastern Europe -15 -15 50 50 Asia -20 Latin America -20 0 0 -25 -25 2002 2004 2006 2008 2002 2004 2006 2008 1) The index is constructed on the basis of the sum of exports and imports in the Sources: Thomson Reuters and Norges Bank US, Japan, Germany and China. The figures are converted into USD 4
  5. 5. International equity markets Equity prices Implied volatility Index, 1 January 2007 = 100. Standard deviation in basis points. 5-day moving average. 1 January 2007 – 22 October 2009 5 January 2007 – 22 October 2009 120 120 100 100 100 100 Euro area US 80 80 80 80 60 60 60 60 Euro area 40 40 40 40 US 20 20 20 20 0 0 0 0 2007 2008 2009 2010 2007 2008 2009 Source: Thomson Reuters 5
  6. 6. Oil price (Brent Blend) Commodity prices In USD per barrel. In USD. Index. Spot and futures prices Spot and futures prices 160 160 650 650 Copper Brent Blend 140 140 Cotton 550 550 22 October 120 120 Aluminium 11 June 450 Wheat 450 100 100 80 80 350 350 60 60 250 250 40 40 20 20 150 150 0 0 50 50 2002 2005 2008 2011 2002 2005 2008 2011 Sources: Thomson Reuters and Norges Bank 6
  7. 7. Spare capacity in Crude oil and refined OPEC product inventories, US Million barrels a day. Monthly figures. In billions of barrels. January 2003 – January 2000 – December 2010 October 2009 8 1.15 1.15 Spare capacity 7 1.10 1.10 Projections from 6 EIA 1.05 1.05 5 1.00 1.00 4 0.95 0.95 3 0.90 0.90 2 Min-max 2003-2008 0.85 2009 0.85 1 2008 Average 2003-2008 0 0.80 0.80 2000 2002 2004 2006 2008 2010 Jan Apr Jul Oct Source: Energy Information Administration (EIA) 7
  8. 8. Key rates and estimated forward rates as at 22 October 20091) Per cent. 1 June 2007 – 31 December 20122) 7 7 6 6 US 5 5 Euro area 4 4 3 3 2 2 1 1 0 0 2007 2008 2009 2010 2011 2012 1) Thin lines show estimated forward rates as at 22 October 2009. Forward rates are derived from Overnight Indexed Swap (OIS) rates 2) Daily figures from 1 June 2007 and quarterly figures from 22 October 2009 Sources: Thomson Reuters and Norges Bank 8
  9. 9. Effective exchange rates1) Index, week 1 2000 = 100. Weekly figures. Week 1 2000 – week 43 2009 160 160 Australia New Zealand 140 140 Canada Norway 120 120 100 100 80 80 2000 2002 2004 2006 2008 1) A rising curve denotes a stronger exchange rate Sources: Thomsen Reuters and Norges Bank 9
  10. 10. GDP growth Growth on previous quarter. Seasonally adjusted. Per cent. 2007 Q1 – 2010 Q4 2 2 Mainland Norway 1 1 Trading partners 0 0 -1 -1 -2 -2 -3 -3 2007 2008 2009 2010 Sources: Statistics Norway and Norges Bank 10
  11. 11. Countercyclical policy using unconventional measures expansionary fiscal policy low key rate extraordinary monetary policy measures Swap arrangements Liquidity supply Other extraordinary measures Norwegian State Finance Fund Government Bond Fund funding for export industries 11
  12. 12. Unwinding the extraordinary measures In recent months Norges Bank has not supplied NOK liquidity through FX swaps not supplied liquidity through foreign exchange market not provided krone liquidity at long maturities Banking system liquidity normalised further The swap arrangement is being phased out Easing of collateral requirements will be reversed Share of banks borrowing facilities collateralised by bank bonds will be reduced 12
  13. 13. Petroleum investment At constant 2006-prices. In billions of NOK. 1983 – 2012 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Sources: Statistics Norway and Norges Bank 13
  14. 14. Real exchange rate Deviation from mean over the period 1970 – 2008. Per cent. 1970 – 20091) 20 20 15 Relative consumer prices Relative wages 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 -20 -20 1970 1975 1980 1985 1990 1995 2000 2005 1) The squares show the average for the period 16 – 22 October 2009. A rising curve indicates weaker Sources: Statistics Norway, Technical Reporting Committee on competitiveness Income Settlements, Ministry of Finance and Norges Bank 14
  15. 15. Bank credit standards for enterprises and households Change in credit standards since previous period1). 2007 Q4 – 2009 Q4 40 40 Enterprises Households 20 20 Easing 0 0 -20 Tightening -20 -40 -40 -60 -60 -80 -80 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1) Red dots indicate expected developments and blue bars indicate actual developments Source: Norges Bank 15
  16. 16. Household credit from domestic sources1) and house prices 12-month change. Per cent. January 2002 – October 2009 25 25 20 20 15 15 10 10 5 5 0 0 Household credit -5 -5 House prices -10 House prices in Østfold -10 -15 -15 2002 2003 2004 2005 2006 2007 2008 2009 1) C2 Sources: Statistics Norway and the real estate industry (NEF EFF FINN.no og ECON Pöyry) , , 16
  17. 17. Household expectations Net figures. Quarterly figures. 1992 Q4 – 2009 Q3 40 20 Monthly figures for October2009 30 15 20 10 10 5 0 0 TNS Gallup, left-hand scale -10 -5 Forbrukermeteret (CCI), right-hand scale 1) -20 -10 1992 1994 1996 1998 2000 2002 2004 2006 2008 1) Quarterly figures based on monthly observations Sources: TNS Gallup, Opinion and Norges Bank 17
  18. 18. Structural non-oil deficit and expected return on the Government Pension Fund – Global In billions of 2010-NOK. 2007 – 2012 160 160 140 Structural non-oil deficit 140 120 Expected real return 120 100 100 80 80 60 60 40 40 20 20 0 0 2007 2008 2009 2010 2011 2012 Sources: Ministry of Finance and Norges Bank 18
  19. 19. LFS unemployment as percentage of labour force Annual figures. 1971 – 2010. Projections are shown by broken lines 14 14 Sweden US Norway UK Germany 12 12 10 10 8 8 6 6 4 4 2 2 0 0 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 Source: OECD 19
  20. 20. Unemployment in Norway As percentage of labour force. Seasonally adjusted. January 2002 – October 2009 6 6 5 5 4 4 3 3 2 Registered unemployment 2 1 Registered unemployment in Østfold 1 0 0 2002 2003 2004 2005 2006 2007 2008 2009 Sources: Statistics Norway, Norwegian Labour and Welfare Administration (NAV) and Norges Bank
  21. 21. Annual wage growth and LFS unemployment Per cent. 1993 – 2010 8 8 Annual wage growth Unemployment rate 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 1993 1996 1999 2002 2005 2008 Sources: Statistics Norway, Technical Reporting Committee on Income Settlements and Norges Bank 21
  22. 22. Inflation 12-month change. Per cent. January 2006 – December 2012 7.5 7.5 CPI CPIXE 5 5 2.5 2.5 0 0 -2.5 -2.5 2006 2007 2008 2009 2010 2011 2012 Sources: Statistics Norway and Norges Bank 22
  23. 23. Projected key policy rate in baseline scenario with fan chart Quarterly figures. Per cent. 2007 Q1 – 2012 Q4 9 9 8 90% 70% 50% 30% 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 2007 2008 2009 2010 2011 2012 Source: Norges Bank 23
  24. 24. Outlook for the Norwegian Economy Deputy Governor Jan F. Qvigstad Sparebank 1, Fredrikstad 4 November 2009
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