OUTLOOK FOR THE NORWEGIAN

ECONOMYGOVERNOR ØYSTEIN OLSEN

Bergen Chamber of Commerce and Industry,

25 October 2019

The Executive Board's assessment and

interest rate forecast

The Executive Board decided in

September to raise the policy rate to

1.5%.

At its meeting in October, the Executive

Board decided to keep the policy rate

unchanged.

The Executive Board´s current

assessment of the outlook and

balances of risks suggest that the policy

rate will mostly remain at this level in

the coming period.

2Source: Norges Bank

0

1

2

3

4

5

6

7

8

2005 2008 2011 2014 2017 2020

Policy rate with forecast from Monetary Policy Report 3/19

Agenda

1. Global challenges

2. What about Norway?

3. Lessons learned

33

1. Global challenges

44

Trade tensions weigh on the outlookGlobal industrial production and trade. Volume

5Source: CPB World Trade Monitor

-6

-1

4

9

2012 2013 2014 2015 2016 2017 2018 2019

Trade

Industrial production

Exports Singapore

5

Heightened uncertaintiesGlobal PMI

Sources: CPB, Thomson Reuters and Norges Bank 6

47

49

51

53

55

2014 2016 2018

Manufacturing PMI

Services PMI

New export orders,manufacturing PMI

Low global interest ratesYields on 10-year government bonds . Percent

7Sources: Bloomberg and Norges Bank

-1

0

1

2

3

4

Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19

US

Germany

Sweden

Norway

Low policy ratesPolicy rates and estimated forward rates1). 22 October 2019. Percent

81) OIS rates.

Sources: Bloomberg, Thomson Reuters and Norges Bank

-1

-0.5

0

0.5

1

1.5

2

2.5

3

2015 2016 2017 2018 2019 2020 2021 2022

US

Euro area

Sweden

Oil price, spot and futuresUSD per barrel Brent Blend

9Sources: Thomson Reuters and Norges Bank

0

20

40

60

80

100

120

140

2013 2015 2017 2019 2021

Oil price

Futures 18 October 2019

Futures MPR 3/19

The krone exchange rate is affected by

global uncertaintyImport-weighted exchange rate index (I-44)

10Source: Norges Bank

101

103

105

107

109

111

Sep-18 Dec-18 Mar-19 Jun-19 Sep-19

I-44

Average for Q4 to date

Projection for Q4 MPR 3/19

Stronger NOK

MPR 3/19

NOK against other currenciesPercentage movement. 13 September – 18 October 2019

Sources: Bloomberg and Norges Bank 11

-6.3 %

-3.3 %

-2.7 %

-2.6 %

-2.3 %

-2.2 %

-1.9 %

-1.4 %

-8% -6% -4% -2% 0% 2%

GBP

CAD

I44

EUR

USD

NZD

SEK

AUD

Weaker krone

2. What about Norway?

12

Solid growth in the Norwegian economy

-4

-2

0

2

4

6

8

2005 2007 2009 2011 2013 2015 2017 2019

Mainland GDP

Regional Network indicator

Four-quarter change. Percent

Sources: Statistics Norway and Norges Bank 13

Unemployment has fallen

0

1

2

3

4

5

6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Entire country

Oil-dependentregions

Hordaland

Unemployed as a percentage of the labour force. Seasonally adjusted

14Sources: Norwegian Labour and Welfare Administration (NAV) and Norges Bank

Inflation is close to the targetTwelve-month change. Percent

15Sources: Statistics Norway and Norges Bank

0

1

2

3

4

5

2010 2012 2014 2016 2018 2020 2022

CPI

CPI-ATE

Inflation target

House prices are at a high level …Index. 1998 Q4 = 100

Sources: Eiendomsverdi, Finn.no, Norwegian Association of Real Estate Agents (NEF), Real Estate Norway, Statistics

Norway and Norges Bank

50

100

150

200

1983 1989 1995 2001 2007 2013 2019

Crises

House prices/disposableincome

House prices/disposable income per capita ( aged 15–74)

16

… but house price inflation is moderateHouse prices. Percentage change

Sources: Eiendomsverdi, Finn.no, Real Estate Norway and Norges Bank

-2

-1

0

1

2

3

-10

-5

0

5

10

15

2014 2015 2017 2018

Seasonally adjustedmonthly change (l.h.s.)

Twelve-month change(r.h.s.)

17

3. Lessons learned

1. Floating exchange rate – a shock absorber

2. Financial stability considerations cannot be neglected

3. Inflation targeting must be flexible

18

Interest rate decision – in a nutshellMPR 3/19

The policy rate

has been

raised to 1.5%

More people

in work

Inflation close

to target

Trade tensions

create

uncertainty

Policy rate

likely kept on

hold in the

near term

Most

households

better off

19

OUTLOOK FOR THE NORWEGIAN

ECONOMYGOVERNOR ØYSTEIN OLSEN

Bergen Chamber of Commerce and Industry,

25 October 2019