The economic outlook
Governor Svein Gjedrem Norges Bank
2 April 2009
Fall in all countries and markets
Index. 1 January 2004 = 100. 1 January 2004 – 31 March 2009 Equity prices
0 100 200 300 400 500
2004 2006 2008
Oil price1)
Freight rates2)
75 80 85 90 95 100 105 110 115
2004 2006 2008
Japan
Prices
0 50 100 150 200 250 300
2004 2006 2008
Emerging markets
OECD
Industrial production
US
Source: Thomson Reuters 1) Brent blend
2) Baltic Dry Index
2
Key rates abroad
Per cent. 1 January 2003 – 2 April 2009
0 1 2 3 4 5 6 7
0 1 2 3 4 5 6 7
2003 2004 2005 2006 2007 2008 2009
UK
US Euro area
Source: Thomson Reuters 3
Mainland GDP
Annual growth in volume. Per cent. 1970 – 2009
1)1970 1975 1980 1985 1990 1995 2000 2005
-2 0 2 4 6 8
-2 0 2 4 6 8
4 1) Projections for 2009
Sources: Statistics Norway and Norges Bank
Key policy and money market rates
Per cent. 1 January 2003 – 31 March 2009
0 1 2 3 4 5 6 7 8
0 1 2 3 4 5 6 7 8
2003 2004 2005 2006 2007 2008 2009
Norges Bank's key policy rate 3-month money market rate
5 Sources: Thomson Reuters and Norges Bank
Oil price (Brent Blend)
USD per barrel. 3 January 2000 – 19 March 2009.
Futures prices (broken lines) 23 October 2008 and 19 March 2009
0 25 50 75 100 125 150
0 25 50 75 100 125 150
2000 2002 2004 2006 2008 2010
Brent Blend 19 March 2009 23 October 2008
6 Source: Thomson Reuters
Commodity prices
USD. Index. 3 January 2000 = 100. 3 January 2000 – 19 March 2009
0 100 200 300 400 500 600 700 800 900
0 100 200 300 400 500 600 700 800 900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Aluminium
Baltic Dry Index Fresh salmon
7 Source: Thomson Reuters
Norway’s terms of trade
Export prices/import prices. 1978 – 2009
1)0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3
0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3
1978 1983 1988 1993 1998 2003 2008
Sources: Statistics Norway, Thomson Reuters and Norges Bank 1) Projections for 2008 and 2009
8
NOK to EUR
1 January 2008 – 31 March 2009 Rate
1)7.5 8.5 9.5 10.5
Daily fluctuations in NOK
2)0 5 10 15 20 25 30
Jan-08 May-08 Sep-08 Jan-09
1) A rising curve denotes a weaker krone exchange rate
2) Difference between highest and lowest rate during the day. 10-day moving average Sources: Thomson Reuters and Norges Bank 9
Consumer prices
12-month change. Per cent. January 2004 – February 2009
-2.5 0 2.5 5 7.5
-2.5 0 2.5 5 7.5
2004 2005 2006 2007 2008 2009
CPI CPIXE 1)
10 1) CPI adjusted for tax changes and excluding temporary changes in energy
prices. SeeStaff Memo 2008/7 from Norges Bank for a description of the CPIXE
Sources: Statistics Norway and Norges Bank
Inflation
Moving 10-year average
1)and variation
2)in CPI
3). 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 CP
I Variation
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 1/09 form the basis for this estimate Sources: Statistics Norway and Norges Bank
11
Capacity utilisation and supply of labour
Norges Bank’s regional network. Share that will have problems accommodating an increase in demand. Per cent.
January 2005 – January 2009
0 10 20 30 40 50 60 70
0 10 20 30 40 50 60 70
Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Supply of labour
Capacity utilisation
12 Source: Norges Bank
Annual wage growth 1) and LFS unemployment
Per cent. 1993 – 2009
2)0 2 4 6 8
0 2 4 6 8
1993 1995 1997 1999 2001 2003 2005 2007 2009 Annual wage growth
Unemployment rate
13 1) Average for all groups. Including estimated costs of increase in number of
vacation days and introduction of mandatory occupational pensions 2) Projections for 2009
Sources: Statistics Norway, Technical Reporting Committee on Income Settlements and Norges Bank
Real exchange rate
Deviation from mean. 1970 – 2008. Per cent. 1970 – 2009
1)-15 -10 -5 0 5 10 15
-15 -10 -5 0 5 10 15
1970 1975 1980 1985 1990 1995 2000 2005 Relative consumer prices
Relative wages
14 1) Data for 2009 based on observations to 19 March. The squares
show the average for this period. A rising curve indicates weaker competitiveness
Sources: Statistics Norway, Technical Reporting Committee on Income Settlements, Ministry of Finance and Norges Bank
Appreciation
Petroleum revenue spending
In billions of 2009 NOK. 2002 – 2012
1)0 20 40 60 80 100 120 140 160
0 20 40 60 80 100 120 140 160
2006 2007 2008 2009 2010 2011 2012
Expected real return on the Government Pension Fund – Global Petroleum revenue spending
15 1) Norges Bank’s projections for 2010 – 2012
Sources: Ministry of Finance and Norges Bank
Baseline scenario. Per cent
16 0
1 2 3 4 5 6
0 1 2 3 4 5 6
2007 2008 2009 2010 2011 2012
0 1 2 3 4 5 6
0 1 2 3 4 5 6
2007 2008 2009 2010 2011 2012 -4 -3 -2 -1 0 1 2 3 4 5
-4 -3 -2 -1 0 1 2 3 4 5
2007 2008 2009 2010 2011 2012 0
1 2 3 4 5 6 7 8 9
0 1 2 3 4 5 6 7 8 9
2007 2008 2009 2010 2011 2012
Output gap Key policy rate
Sources: Statistics Norway and Norges Bank Underlying inflation2)
Inflation1)
1) CPI
2)CPI adjusted for tax changes and excluding temporary changes in energy prices
Baseline scenario. Per cent
17 0
1 2 3 4 5 6
0 1 2 3 4 5 6
2007 2008 2009 2010 2011 2012
0 1 2 3 4 5 6
0 1 2 3 4 5 6
2007 2008 2009 2010 2011 2012 -4 -3 -2 -1 0 1 2 3 4 5
-4 -3 -2 -1 0 1 2 3 4 5
2007 2008 2009 2010 2011 2012 0
1 2 3 4 5 6 7 8 9
0 1 2 3 4 5 6 7 8 9
2007 2008 2009 2010 2011 2012 30%
50%
70%
90%
Output gap Key policy rate
Sources: Statistics Norway and Norges Bank Underlying inflation2)
Inflation1)
1) CPI
2)CPI adjusted for tax changes and excluding temporary changes in energy prices
Size of the banking sector
Total assets as share of GDP. 2001 – 2007
0 2 4 6 8 10
0 2 4 6 8 10
2001 2002 2003 2004 2005 2006 2007
Switzerland2) UK2) Iceland3)
Sweden4) Norway5)
1) All banks, excluding foreign-owned branches 2) UK resident banks
3) Kaupthing, Landsbanki and Glitnir and their foreign subsidiaries 4) All banks
5) All banks, excluding foreign-owned branches and subsidiaries
Sources: Swiss National Bank, Bank of England, Riksbanken, IMF, Financial Supervisory Authorities
Iceland and Norges Bank 18
Norwegian banks’ equity capital 1)
Percentage of total assets. 1875 – 2008
0 5 10 15 20
0 5 10 15 20
1875 1895 1915 1935 1955 1975 1995
Sources: Klovland (2007), Statistics Norway and Norges Bank 1) Includes savings and commercial banks
19
Norwegian banks’ sources of funding 1)
Percentage of total assets. 1875 – 2008
0 20 40 60 80 100
0 20 40 60 80 100
1875 1895 1915 1935 1955 1975 1995
Equity capital
Deposits
Market funding and other debt
Sources: Klovland (2007), Matre (1992), Statistics Norway and Norges Bank 1) Includes savings and commercial banks
20
Market value of the Government Pension Fund – Global
In billions of NOK
0 500 1000 1500 2000 2500
0 500 1000 1500 2000 2500
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
21 Source: Norges Bank
Government assets
Lower market values in 2008. In billions of NOK
Government Pension Fund – Norway -30
Government direct ownership
1-230
Government share of subsea petroleum resources
2-2 200 Government Pension Fund – Global
3-130 (-630)
Household housing wealth
4-400
22 Sources: Ministry of Finance, Ministry of Trade and Industry,
Folketrygdfondet and Norges Bank 1) Decrease in value adjusted for dividends. Companies listed on the stock exchange
2) Fall in value of the government share of subsea petroleum resources with a decline in the price of oil from NOK 500 to NOK 300 per barrel. The oil price was approximately NOK 500 per barrel at the turn of the quarter Q3/Q4 and now stands at around NOK 350 per barrel
3) Negative return measured in NOK. Negative return measured in international currency in brackets 4) Fall in housing wealth from August 2007 to 2008 Q4 (nominal terms)
Fixed income portofolio by credit rating 1)
Government Pension Fund – Global. Per cent.
0 10 20 30 40 50 60 70
0 10 20 30 40 50 60 70
Aaa Aa A Baa Ba Lower No rating
23 Source: Norges Bank 1) Based on credit ratings from at least one of the following rating agencies: Moody’s, Standard
& Poor’s and Fitch. The”no rating” category consists of securites not rated by these three agencies; these securities may, however, have been rated by other, local agencies.
Purchase of equities
Index.1997 Q4 = 0. In billions of NOK.1998 Q1 – 2008 Q4
-50 0 50 100 150 200
1998 2000 2002 2004 2006 2008
-50 0 50 100 150 200
Return on equities, index Purchase of equities, NOK bn
Source: Norges Bank 24
Ownership of equity markets
Per cent. 1998 – 2008
0 0.2 0.4 0.6 0.8 1 1.2 1.4
0 0.2 0.4 0.6 0.8 1 1.2 1.4
1998 2000 2002 2004 2006 2008
Americas Asia and Oceania Europe
Sources: FTSE and Norges Bank 25
