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Deputy Governor Jan F. Qvigstad SpareBank 1 Fredrikstad 4 November 2009
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Outlook for the Norwegian Economy
Deputy Governor Jan F. QvigstadSparebank 1, Fredrikstad4 November 2009
InflationMoving 10-year average1) and variation2) in CPI3). Per cent. 1980 – 2009
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
1980 1985 1990 1995 2000 2005
CPI Inflation target
Sources: Statistics Norway and Norges Bank1) The moving average is calculated 7 years back and 2 years ahead2) The band around the CPI is the variation in the CPI adjusted for tax changes and excludingenergy products in the average period, measured by +/- one standard deviation3) Estimate based on projections for 2009 – 2011 from Monetary Policy Report 3/09
2
Credit risk for selectedbanksMeasured by CDS spreads. Basis points. 1 January 2007 – 22 October 2009
0
100
200
300
400
500
600
700
0
100
200
300
400
500
600
700
Jan-07 Oct-07 Jul-08 Apr-09
Citigroup
JP Morgan
3
Sources: Bloomberg, Thomson Reuters and Norges Bank
0
1
2
3
4
0
1
2
3
4
Jan-07 Oct-07 Jul-08 Apr-09
Norway 2)
US
Euro area
Money market spreads1) 5-day moving average. Percentagepoints. 5 January 2007 – 22 October 2009
1) Spread between 3-month money market rate and market key rate expectations2) Norges Bank’s projections
Indicator of world trade1)
Index, January 2002 = 100.January 2002 – August 2009
4
Sources: Thomson Reuters and Norges Bank1) The index is constructed on the basis of the sum of exports and imports in the
US, Japan, Germany and China. The figures are converted into USD
-25
-20
-15
-10
-5
0
5
10
15
20
25
-25
-20
-15
-10
-5
0
5
10
15
20
25
2002 2004 2006 2008
OECD
Eastern Europe
Asia
Latin America
Manufacturing in OECD and emerging markets 12-month change. Per cent. January 2002 – August 2009
0
50
100
150
200
250
300
2002 2004 2006 2008
0
50
100
150
200
250
300
International equity marketsEquity pricesIndex, 1 January 2007 = 100.1 January 2007 – 22 October 2009
0
20
40
60
80
100
120
0
20
40
60
80
100
120
2007 2008 2009 2010
Euro area
US
Implied volatilityStandard deviation in basis points. 5-day moving average.5 January 2007 – 22 October 2009
5
0
20
40
60
80
100
0
20
40
60
80
100
2007 2008 2009
Euro area US
Source: Thomson Reuters
Oil price (Brent Blend)In USD per barrel. Spot and futures prices
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
2002 2005 2008 2011
Brent Blend
22 October
11 June
50
150
250
350
450
550
650
50
150
250
350
450
550
650
2002 2005 2008 2011
Copper
Cotton
Aluminium
Wheat
6
Sources: Thomson Reuters and Norges Bank
Commodity pricesIn USD. Index. Spot and futures prices
7
0
1
2
3
4
5
6
7
8
2000 2002 2004 2006 2008 2010
Spare capacity
Projections from EIA
Spare capacity in OPECMillion barrels a day. Monthlyfigures. January 2000 – December 2010
Crude oil and refinedproduct inventories, USIn billions of barrels. January 2003 –October 2009
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
Jan Apr Jul Oct
Min-max 2003-200820092008Average 2003-2008
Source: Energy Information Administration (EIA)
Key rates and estimated forward rates as at 22 October 20091)
Per cent. 1 June 2007 – 31 December 20122)
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
2007 2008 2009 2010 2011 2012
US
Euro area
8
1) Thin lines show estimated forward rates as at 22 October 2009. Forward rates are derived from Overnight IndexedSwap (OIS) rates
2) Daily figures from 1 June 2007 and quarterly figures from 22 October 2009 Sources: Thomson Reuters and Norges Bank
Effective exchange rates1)
Index, week 1 2000 = 100. Weekly figures. Week 1 2000 – week 43 2009
80
100
120
140
160
80
100
120
140
160
2000 2002 2004 2006 2008
Australia
New Zealand
Canada
Norway
9
Sources: Thomsen Reuters and Norges Bank1) A rising curve denotes a stronger exchange rate
-3
-2
-1
0
1
2
-3
-2
-1
0
1
2
2007 2008 2009 2010
Mainland Norway
Trading partners
10
Sources: Statistics Norway and Norges Bank
GDP growthGrowth on previous quarter. Seasonally adjusted. Per cent. 2007 Q1 – 2010 Q4
Countercyclical policy using unconventionalmeasures
expansionary fiscal policylow key rateextraordinary monetary policy measures
Swap arrangementsLiquidity supply
Other extraordinary measuresNorwegian State Finance FundGovernment Bond Fundfunding for export industries
11
Unwinding the extraordinary measures
In recent months Norges Bank hasnot supplied NOK liquidity through FX swapsnot supplied liquidity through foreign exchangemarketnot provided krone liquidity at long maturities
Banking system liquidity normalised furtherThe swap arrangement is being phased outEasing of collateral requirements will be reversedShare of banks borrowing facilities collateralised by bank bonds will be reduced
12
Petroleum investmentAt constant 2006-prices. In billions of NOK. 1983 – 2012
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
13
Sources: Statistics Norway and Norges Bank
Real exchange rateDeviation from mean over the period 1970 – 2008. Per cent. 1970 – 20091)
-20
-15
-10
-5
0
5
10
15
20
-20
-15
-10
-5
0
5
10
15
20
1970 1975 1980 1985 1990 1995 2000 2005
Relative consumer prices Relative wages
14
Sources: Statistics Norway, Technical Reporting Committee onIncome Settlements, Ministry of Finance and Norges Bank
1) The squares show the average for the period 16 – 22 October 2009. A rising curve indicates weakercompetitiveness
Bank credit standards for enterprises and householdsChange in credit standards since previous period1). 2007 Q4 – 2009 Q4
Source: Norges Bank
-80
-60
-40
-20
0
20
40
-80
-60
-40
-20
0
20
40
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Enterprises Households
Easing
15
Tightening
1) Red dots indicate expected developments and blue bars indicate actual developments
Household credit from domestic sources1)
and house prices12-month change. Per cent. January 2002 – October 2009
-15
-10
-5
0
5
10
15
20
25
-15
-10
-5
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009
Household credit
House prices
House prices in Østfold
16
1) C2 Sources: Statistics Norway and the real estate industry (NEF, EFF, FINN.no og ECON Pöyry)
Household expectationsNet figures. Quarterly figures. 1992 Q4 – 2009 Q3
-10
-5
0
5
10
15
20
-20
-10
0
10
20
30
40
1992 1994 1996 1998 2000 2002 2004 2006 2008
TNS Gallup, left-hand scale
Forbrukermeteret (CCI), right-hand scale 1)
Sources: TNS Gallup, Opinion and Norges Bank
17
1) Quarterly figures based on monthly observations
Monthly figures for October2009
Structural non-oil deficit and expected returnon the Government Pension Fund – Global In billions of 2010-NOK. 2007 – 2012
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012
Structural non-oil deficit
Expected real return
18
Sources: Ministry of Finance and Norges Bank
LFS unemployment as percentage of labourforceAnnual figures. 1971 – 2010. Projections are shown by broken lines
19
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010
Sweden US Norway UK Germany
Source: OECD
Unemployment in NorwayAs percentage of labour force. Seasonally adjusted. January 2002 – October 2009
0
1
2
3
4
5
6
0
1
2
3
4
5
6
2002 2003 2004 2005 2006 2007 2008 2009
Registered unemployment
Registered unemployment in Østfold
Sources: Statistics Norway, Norwegian Labour and Welfare Administration (NAV) and Norges Bank
Annual wage growth and LFS unemploymentPer cent. 1993 – 2010
0
1
2
3
4
5
6
7
8
0
1
2
3
4
5
6
7
8
1993 1996 1999 2002 2005 2008
Annual wage growth Unemployment rate
21
Sources: Statistics Norway, Technical Reporting Committee on Income Settlements and Norges Bank
Inflation12-month change. Per cent. January 2006 – December 2012
Sources: Statistics Norway and Norges Bank
22
-2.5
0
2.5
5
7.5
-2.5
0
2.5
5
7.5
2006 2007 2008 2009 2010 2011 2012
CPI CPIXE
Projected key policy rate in baseline scenario with fan chartQuarterly figures. Per cent. 2007 Q1 – 2012 Q4
23
90% 70% 50% 30%
Source: Norges Bank
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
Outlook for the Norwegian Economy
Deputy Governor Jan F. QvigstadSparebank 1, Fredrikstad4 November 2009
