Norway Growth to Be Near Potential Amid Export Risk, IMF SaysStephen Treloar
Norway’s mainland economic output will stay close to potential as inflation and unemployment remains low, the International Monetary Fund said, citing risks from falling oil prices and slowing housing demand.
Economic growth in the mainland, which excludes oil and gas production and shipping, will “remain near potential and grow at about 2.75 percent in 2013 and throughout the medium term,” the Washington-based group said today.
Norway, western Europe’s biggest oil exporter, has been shielded from the worst of the debt crisis as its crude revenue generates surpluses and unemployment remains close to 3 percent. The central bank has kept interest rates unchanged for more than a year, after cutting them twice to weaken the krone, and has estimated it will again need to tighten policy next year.
Monetary policy is appropriate and a tightening “might help cool housing markets, but at the cost of likely exchange rate appreciation and additional pressure on the non-oil-related sectors of the mainland economy,” the IMF said.
The group also said that Norway faces risk from a substantial drop in oil prices as well as a “significant reduction in home prices” because of high levels of household debt. It recommended the government also use less of its oil wealth to plug deficits “in the light of the wage pressures and other competitiveness concerns.”