Economic perspectives

Economic perspectives 

Address by Governor Svein Gjedrem to the Supervisory Council of Norges Bank  and invited guests on Thursday 11 February 2010  

Charts 

Chart 1 Current account. As a percentage of world GDP.

2000 - 2009¹⁾

2000 2002 2004 2006 2008 -2 -1 0 1 2

-2 -1 0 1 2

Asia 2) US

1) IMF’s estimates for 2009

2) Bangladesh, Bhutan, Cambodia, China, Fiji, India, Indonesia, Kiribati, Lao People's Democratic Republic, Malaysia, Maldives, Myanmar, Nepal, Pakistan, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Tonga, Vanuatu and Vietnam Sources: IMF World Economic Outlook Database April 2009 and Norges Bank

Chart 2 General government financial balances. As a percentage of GDP.

2007 – 2017¹⁾

-12 -10 -8 -6 -4 -2 0

-12 -10 -8 -6 -4 -2 0

2007 2009 2011 2013 2015 2017

OECD US Euro area

1) Estimates for 2009-2011 and 2017 Source: OECD Economic Outlook 86

Chart 3 Government debt. As a percentage of GDP. 2008 – 2017¹⁾

0 20 40 60 80 100 120

0 20 40 60 80 100 120

Euro area US OECD

2008 2009 2010 2017

1) Estimates for 2009, 2010 and 2017 Source: OECD Economic Outlook 86

0 2 4 6 8 10 12

0 2 4 6 8 10 12

1 2 3 4 5 6 7 8 9 10

UK US EU 6 2)

Chart 4 Unemployment. Developments in recessions. Per cent.

From the 1980s (solid lines) and 2008 - 2010 (dotted lines)¹⁾

1) Estimates for 2009 and 2010

2) Belgium, France, Germany, Italy, Luxembourg and the Netherlands. GDP-weighted Sources: IMF World Economic Outlook Database April 2009 and Norges Bank

Years after the lowest level of unemployment

Chart 5 Growth in Gross National Income and Gross Domestic Product for Norway.

Per cent.1988 - 2008

1988 1992 1996 2000 2004 2008 -4

-2 0 2 4 6 8 10 12 14 16

-4 -2 0 2 4 6 8 10 12 14 16

GNI

Mainland GDP

Sources: Statistics Norway and Norges Bank

-20 -15 -10 -5 0 5 10 15 20 25

-20 -15 -10 -5 0 5 10 15 20 25

1990 1995 2000 2005 2010 Chart 6 Relative labour costs. Deviation from the average for the period

1970 – 2009. Per cent. 1990 – 2010¹⁾

1) The figure for 2010 is the average for the period 1 January - 9 February 2010. A rising curve indicates weaker competitiveness

Sources: Statistics Norway, Technical Reporting Committee on Income Settlements, Ministry of Finance and Norges Bank

0 2 4 6 8 10 12

0 2 4 6 8 10 12

1990 1995 2000 2005 2010 Chart 7 Real interest rate.¹⁾ Nine-month centred moving average. Per cent

January 1990 – September 2009

1) Three-month money market rate deflated by the CPI Source: Statistics Norway and Norges Bank

Chart 8 Terms of trade. Index, 2007 = 1. 1990 Q1– 2009 Q3

Source: Statistics Norway

0,5 0,75 1 1,25

0,5 0,75 1 1,25

1990 1995 2000 2005 2010

Chart 9 GDP growth on previous quarter. Norway and trading partners.

Seasonally adjusted. Per cent. 2007 Q1 – 2009 Q3

-3 -2 -1 0 1 2

-3 -2 -1 0 1 2

2007 2008 2009

Mainland Norway Trading partners

Sources: Statistics Norway and Norges Bank

Chart 10 Equity prices. Index, 3 January 2000 = 100 3 January 2000 – 29 January 2010

0 50 100 150 200 250 300 350

0 50 100 150 200 250 300 350

2000 2002 2004 2006 2008 2010

Emerging markets World

Norway

Source: Thomson Reuters

Chart 11 Real house prices.¹⁾ Index, 1995 Q1 = 100 1995 Q1 – 2009 Q4²⁾

50 100 150 200 250 300

50 100 150 200 250 300

1995 2000 2005 2010

Spain US Norway Denmark

1) Deflated by the CPI

2) US to 2009 Q3. Denmark to 2009 Q2 Kilde: Ecowin

Invest in housing

Repay debt Invest in business

Before tax 4.0% 4.0% 4.0%

After tax - without wealth tax

4.0% 2.9% 2.9%

- with wealth tax

3.7% 1.8% 1.8%

Tabel 1 Return on alternative investments 

Source: Norges Bank. See Staff Memo 2010/1 from Norges Bank

Chart 12 Household wealth and debt as per 2009 Q3. In billions of NOK

0 1000 2000 3000 4000 5000 6000 7000

Assets Liabilities

Loans

Housing wealth¹⁾ Banknotes, coins and bank deposits

Other claims

Equity

1) Norges Bank’s estimates

Sources: Statistics Norway and Norges Bank

Chart 13. Taxes on property. As a percentage of GDP. 2007

0 1 2 3 4 5

0 1 2 3 4 5

OECD average UK

France

Canada

US

Sweden

Norway

Sources: OECD Revenue Statistics 2009 and Norges Bank. See Staff Memo 2010/1 from Norges Bank

Chart 14 Menu for changes in the tax system

Property tax + 35 bn

Lower rate on ordinary income -10 bn per percentage

point

Source: Norges Bank. See Staff Memo 2010/1 from Norges Bank

Remove surtax - 19 bn

Remove wealth tax - 12 bn

Increase the basic tax allowance by

NOK 1000 - 0.6 bn

Chart 15 Inflation in Norway.¹⁾ Per cent. 1650 - 2007

-10 -5 0 5 10 15

-10 -5 0 5 10 15

1650 1750 1850 1950

1) Moving average. Calculated 7 years back and 2 years ahead Source: Norges Bank

Chart 16 Inflation. Moving 10-year average¹⁾ and variation²⁾ in the CPI³⁾. Per cent. 1980 - 2009

0 2 4 6 8 10 12 14

0 2 4 6 8 10 12 14

1980 1984 1988 1992 1996 2000 2004 2008

Variation CPI

Inflation target

1) The moving average is calculated 7 years back and 2 years ahead

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) Projections for 2009 - 2011 from MPR 3/09 form the basis for this estimate Sources: Statistics Norway and Norges Bank

Chart 17 The fiscal rule. In billions of NOK. 2002 - 2013

0 20 40 60 80 100 120 140 160

0 20 40 60 80 100 120 140 160

2002 2004 2006 2008 2010 2012

Petroleum spending

Expected return (4% of the fund) Tightening 1994-96

Tightening 2011-13

Sources: Ministry of Finance and Norges Bank. See Staff Memo 2010/1 from Norges Bank

Limited manufacturing  Some manufacturing  Manufacturing 

municipalities 

Typical manufacturing  municipalities 

Chart 18 Municipalities with a high portion of employees in

manufacturing. 2008

Sources: Statistics Norway and Norges Bank

0 2 4 6 8 10

0 2 4 6 8 10

1998 2000 2002 2004 2006 2008 Chart 19 Average return since 1998 on the Government Pension Fund Global.

1998 – 2009¹⁾

1) To the end of 2009 Q3 Source: Norges Bank