ECONOMIC OUTLOOK

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1 ECONOMIC OUTLOOK

GOVERNOR ØYSTEIN OLSEN

Molde, 17 November 2021

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Topics

▪ Rapid economic recovery

▪ Recent developments

▪ From a unique economic

position to restructuring

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Rapid economic recovery

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Marked upswing in the Norwegian economy…

GDP ¹⁾ for mainland Norway

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1) Index. 2019 Q4 = 100. Forecasts from Monetary Policy Report 3/21.

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

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… and the recovery abroad continues

GDP ¹⁾ in selected countries

1) Index. 2019 Q4 = 100. Forecasts from Monetary Policy Report 3/21.

5 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

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Unemployment on the decline

Registered fully unemployed as a share of the labour force. ¹⁾ Percent

1) Sesonally adjusted

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Sources: Norwegian Labour and Welfare Administration and Norges Bank

0 1 2 3 4 5 6 7 8

2015 2017 2019 2021 2023

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Household consumption on the way

back Shift in household consumption away

from services towards goods

²⁾

Large effects on bank deposit ¹⁾

0 20 40 60 80 100 120 140

Mar-17 Mar-18 Mar-19 Mar-20 Mar-21

130 140 150 160 170 180 190 200

Mar-19 Dec-19 Sep-20 Jun-21 Services

Goods

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1) In billions of NOK. Net bank deposit transactions in the past four quarters. 2) Constant prices. Seasonally adjusted.

In billions of NOK. Forecasts from Monetary Policy Report 3/21.

Sources: Statistics Norway and Norges Bank

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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.

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Source: Norges Bank

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Recent developments

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The pandemic is not over

0 10 20 30 40 50 60 70 80 90

Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21

US

Euro area UK

Denmark Norway

New infected per 100 000 inhabitants. Seven-day moving average

10

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Interest rates abroad also on the way up?

Yields on 10-year government bonds in selected countries. Percent

Source: Bloomberg

11 -1 0 1 2 3 4 5 6

2007 2009 2011 2013 2015 2017 2019 2021

Germany UK

US

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Long delivery times in manufacturing

PMI manufacturing delivery times

Source: Refinitiv Datastream

12 0 10 20 30 40 50 60 70 80

2005 2009 2013 2017 2021

US UK Euro area Sweden Norway

Shorter delivery time

Longer delivery

time

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Oil and gas prices have risen

Oil prices. USD per barrel. Natural gas prices. USD per MMBtu

13 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.)

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Sharp rise in electricity prices

Electricity prices in Norway and Germany. Øre/kWh

14 0

40 80 120 160 200

2010 2013 2016 2019 2022

Norway Germany

Futures prices 15 November 2021

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Energy prices have boosted consumer prices

Consumer price index (CPI). Twelve-month change. Percent

Source: Refinitiv Datastream

15 -3 -2 -1 0 1 2 3 4 5 6 7

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

US Euro area

UK Sweden

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Norway: Prospects for inflation close to target

CPI and CPI-ATE. ¹⁾ Four-quarter change. Percent

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1) Forecasts from the Monetary Policy Report 3/21.

0 1 2 3 4 5

2014 2016 2018 2020 2022 2024

Underlying inflation

Consumer price index

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From a unique economic position to restructuring

▪ Solid government finances, but….

▪ …the green transition is underway

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The GPFG may be close to peaking…

Percentage of trend mainland GDP

Source: Ministry of Finance

18 -5

0 5 10 15 20 25

1970 1990 2010 2030 2050

Government petroleum revenue Government petroleum revenue spending

3% path

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…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

19 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

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The green transition is underway

Business investment in mainland Norway. Contribution to annual growth.

20 -10 -5 0 5 10 15

2015 2017 2019 2021 2023

Other sectors

Electricity supply

CCS, batteries, hydrogen and

other projects in the process

industry and domestic shipping

Business investment

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ECONOMIC OUTLOOK

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