Sept. 22 (Bloomberg) -- Norway’s central bank may signal higher interest rates next month, after leaving borrowing costs unchanged tomorrow, as the oil-reliant economy recovers from its worst recession in two decades, a survey of economists showed.

Oslo-based Norges Bank will keep the overnight deposit rate on hold at 1.25 percent for a second meeting, according to all 15 economists surveyed by Bloomberg. The bank will announce its decision on at 2 p.m. local time on Sept. 23.

Norway’s non-oil economy came out of recession last quarter after a 130 billion-kroner ($22.1 billion) stimulus package boosted consumer spending. Norges Bank, which has cut borrowing costs to a record low, said last month it may reverse an easing cycle earlier than planned if signs of a recovery prevail.

“Recent data confirmed that economic activity is better than the bank expected,” said Bjoern-Roger Wilhelmsen, a senior economist at First Securities ASA in Oslo, in a note to clients on Sept. 17. “The recovery in household demand started earlier and has been more pronounced” than the bank anticipated.

The mainland economy, excluding oil, gas and shipping, grew 0.3 percent in the second quarter from the previous three months, according to Statistics Norway. The government this year proposed a stimulus package equivalent to 4.7 percent of output, according to the Organization for Economic Cooperation and Development. The average stimulus this year in the 16- nation euro area is 0.7 percent of gross domestic product.

Prime Minister Jens Stoltenberg, who was reelected on Sept. 14, spent a record amount of the country’s $430 billion oil and gas wealth this year to galvanize the economy.

The krone, which has strengthened 5.2 percent against the euro over the past three months on increasing signs of a recovery and expectations of an interest rate rise later this year, traded at 8.6306 by 11:50 a.m. in Oslo.

First to Raise

Stimulus measures helped lift Germany, Europe’s largest economy, out of its worst recession since World War II last quarter. France’s economy, the second-biggest in the euro region, also exited a year-long contraction. The 16-nation euro area shrank 0.1 percent in the same period.

Norges Bank expects the mainland economy to grow 2.5 percent in 2010 after shrinking 1.5 percent this year. Governor Svein Gjedrem, who has cut the key rate by 4.5 percentage points in the past 11 months, may become the first policy maker in the developed world to begin raising borrowing costs, economists say.

“Given that Norges Bank is saying they might start hiking rates soon I think they will flag it again,” said Gizem Kara, economist at BNP Paribas in London.

Prospects

Gjedrem needs to weigh the prospect of an economic recovery against slowing price growth. The underlying inflation rate dropped for a second consecutive month in August to 2.3 percent, the lowest since May 2008.

Norway’s stimulus measures kept unemployment at the lowest level in Europe. In August, registered unemployment stood at 3 percent. Joblessness has increased less than expected through the crisis, Norges Bank said on June 17.

Even so, there are some signs the world’s second largest gas exporter may face a sluggish recovery as manufacturing industry is slow to rebound amid falling orders and production.

The sector plunged the most in half a decade in August, pushing it back into contraction after a month of expansion, the purchasing managers’ index, compiled by Fokus Bank A/S, showed.

To contact the reporter on this story: Josiane Kremer in Oslo at Jkremer4@bloomberg.net.

Last Updated: September 22, 2009 05:57 EDT