1
ECONOMIC OUTLOOK
GOVERNOR ØYSTEIN OLSEN
Fredrikstad, 9 November 2021
2
Topics
Rapid economic recovery
Recent developments
From a unique economic position to
restructuring
Rapid economic recovery
3
The policy rate is normalising
Monetary policy meeting of 3 November Policy rate path
1)-1 0 1 2 3
2014 2016 2018 2020 2022 2024
The policy rate was kept unchanged at 0.25%.
A normalising economy suggests that it will be appropriate to raise the policy level
further from today’s level.
1) Norges Banks’ policy rate. Percent.
4
Source: Norges Bank
Marked upswing in the Norwegian economy…
75 80 85 90 95 100 105 110
Mar-18 Nov-18 Jul-19 Mar-20 Nov-20 Jul-21 Mar-22 Nov-22
Norway
GDP 1) for mainland Norway
5
1) Index. 2019 Q4 = 100. Forecasts from Monetary Policy Report 3/21.
Sources: Refinitiv Datastream and Norges Bank
… and the recovery abroad continues
GDP 1) in selected countries
1) Index. 2019 Q4 = 100. Forecasts from Monetary Policy Report 3/21.
6
Sources: Refinitiv Datastream and Norges Bank
75 80 85 90 95 100 105 110
Mar-18 Nov-18 Jul-19 Mar-20 Nov-20 Jul-21 Mar-22 Nov-22
Norway Euro area US
UK
Sweden
Recent developments
Expectations of increased policy rates abroad
Bottlenecks as economies open up
Higher energy prices
Rise in inflation
… but the pandemic is still causing uncertainty
7
Expectations of faster rate rise among trading partners
Policy rates and estimated forward rates 1) . Percent
1) Overnight Index Swap (OIS) rates. 2) ECB deposit facility rate.
8
Sources: Bloomberg, Refinitiv Datastream and Norges Bank
-1 0 1 2 3
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
US UK
Euro area²⁾
Sweden
Long delivery times in manufacturing
0 10 20 30 40 50 60 70 80
2005 2008 2011 2014 2017 2020
US UK Euro area Sweden
Shorter delivery time
Longer delivery time
PMI manufacturing delivery times
Source: Refinitiv Datastream
9
Oil and gas prices have risen
Oil prices. USD per barrel. Natural gas prices. USD per MMBtu
Sources: Refinitiv Datastream and Norges Bank
10
0 20 40 60 80 100 120 140 160 180
0 5 10 15 20 25 30 35 40 45
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Natural gas (l.h.s.) Oil (r.h.s.)
Sharp rise in electricity prices
0 40 80 120 160
2010 2013 2016 2019 2022
Norway Germany
Futures prices 2 Nov 2021
Electricity prices in Norway and Germany. Øre/kWh
Sources: Refinitiv Datastream and Norges Bank
11
Energy prices have boosted consumer prices
-3 -2 -1 0 1 2 3 4 5 6
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
US Euro area
UK Sweden
Consumer price index (CPI). Twelve-month change. Percent
Source: Refinitiv Datastream
12
Norway: Prospects for inflation close to target
CPI and CPI-ATE. 1) Four-quarter change. Percent
13
1) Forecasts from the Monetary Policy Report 3/21.
Sources: Statistics Norway and Norges Bank
0 1 2 3 4 5
2014 2016 2018 2020 2022 2024
Underlying inflation
Consumer price index
From a unique economic position to restructuring
Solid government finances, but….
The green transition is underway
The GPFG may be close to peaking…
Percentage of trend mainland GDP
Source: Ministry of Finance
15 -5
0 5 10 15 20 25
1970 1990 2010 2030 2050
Government petroleum revenues Government petroleum revenue spending
3% path
…and the risk has been transferred to the financial market
We can expect a loss of 10%
or more of the fund’s value every six years.
Expected absolute volatility for the fund
16
Percent Billions of NOK
0 200 400 600 800 1 000 1 200
0 2 4 6 8 10 12 14 16 18 20
Risk in percentage terms
Risk in NOK terms
The green transition is underway
Business investment in mainland Norway. Contribution to annual growth.
Sources: Statistics Norway and Norges Bank
