Nor­way's cen­tral bank set for rate cut amid slow growth

The Pak Banker - - COMPANIES/BOSS -

OSLO: The Nor­we­gian econ­omy, once one of Europe's bright­est, ground to a halt in late 2015, leav­ing full-year growth at its low­est in six years and con­sumer con­fi­dence at its low­est in 24 years, strength­en­ing the case for cen­tral bank rate cuts. As western Europe's top oil and gas pro­ducer, Nor­way has been hit by the 70 per­cent fall in crude prices since mid-2014. Un­em­ploy­ment has reached a 10-year high of 4.6 per­cent, low by global stan­dards but far above the 3.2 per­cent seen in mid-2014.

The weaker crown, down al­most 20 per­cent since mid-2014 on a tradeweighted ba­sis be­cause to lower crude prices, has been key to mak­ing non-oil ex­porters more com­pet­i­tive, but not enough to boost the over­all econ­omy. Growth in main­land Nor­way, which ex­cludes volatile oil and ship­ping, reached 0.1 per­cent in the fourth quar­ter. Third-quar­ter fig­ures were re­vised to no growth from the pre­lim­i­nary 0.2 per­cent in Novem­ber, Statis­tic Nor­way said on Tues­day. For 2015, main­land growth fell to 1.0 per­cent, the low­est since the fi­nan­cial cri­sis of 2009 and below the cen­tral bank's fore­cast of 1.4 per­cent. Still, the mi­nor­ity govern­ment lead­ing Nor­way be­lieves the coun­try can weather the down­turn, even though oil prices have fallen more than ex­pected and China's econ­omy is slow­ing.

With a weak­en­ing cur­rency, an $800 bil­lion wealth fund and the po­ten­tial for more re­duc­tions in in­ter­est rates, Nor­way can grad­u­ally di­ver­sify from oil and gas out­put, which makes up more than a fifth of GDP, Prime Min­is­ter Erna Sol­berg told Reuters on Mon­day.

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