Norway Oil Spending Slowdown Adds to Central Bank Rate PressureJosiane Kremer
Norway’s central bank may postpone planned interest-rate increases this year and ease pressure on the krone as the pace of investment in the country’s petroleum industry slows, damping the economy’s main growth driver.
Spending on oil and gas in western Europe’s largest crude exporter may rise to 198.7 billion kroner ($34.9 billion) this year, Statistics Norway said today, citing its quarterly survey of producers and explorers. That’s a reduction from a December estimate of 207.8 billion kroner, it said. While spending would still be at a record level, it would mean the rate of investment growth slows to 15 percent this year from 2012, when spending jumped 18 percent.
“A cooling off of this activity is a signal that the entire economy may be levelling off,” Svenska Handelsbanken AB Chief Economist Knut Anton Mork said in a note to clients. The reduced estimate for spending “adds to the now many arguments for postponing the next rate hike,” he said by phone from Oslo. “The currency responds to the interest rate.”
Norway’s central bank has kept its benchmark interest rate at 1.5 percent since March last year partly to cool krone gains. Policy makers have signaled they may raise interest rates as early as this month to temper a booming housing market.
The cut in petroleum investment estimate may “push the interest rate path somewhat out in time,” DNB ASA senior economist Knut Magnussen said in a note to clients.
The krone, which has emerged as a haven for investors seeking to escape Europe’s debt crisis, strengthened 0.1 percent to 7.4287 versus the euro and was little changed at 5.6964 against the dollar as of 12:23 p.m. in Oslo.
Norges Bank is scheduled to publish its interest rate decision, along with updated rate forecasts, on March 14.
-- Editors: Alastair Reed, Tasneem Brogger.