OUTLOOK FOR THE
NORWEGIAN AND GLOBAL
ECONOMIES
GOVERNOR
ØYSTEIN OLSEN
Gardermoen, 23 May 2017
Agenda
Global economy – Brighter near-term outlook
– But heightened uncertainty
Oil market – Is USD 50 the new price path?
Norwegian economy – The economy has turned the corner
2
Agenda
Global economy – Brighter near-term outlook
– But heightened uncertainty
Oil market – Is USD 50 the new price path?
Norwegian economy – The economy has turned the corner
3
Brighter near-term global outlook
Global GDP growth.1) Projections from the IMF provided at different times. Percent
1) Broken lines show IMF projections published in April of the years listed. October for 2016.
Source: IMF
2.5
3.0
3.5
4.0
4.5
5.0
5.5
2010 2012 2014 2016 2018
2012 Apr
2013 Apr
2014 Apr
2015 Apr
2016 Oct
2017 Apr
4
Upturn in manufacturing output and global trade
Percentage change from previous three-month period (unless otherwise indicated)
Source: Thomson Reuters
48
49
50
51
52
53
54
55
-2
-1
0
1
2
3
4
5
2012 2014 2016
Global manufacturingoutput (l.h.s.)
Global trade (l.h.s.)
Global PMImanufacturing (r.h.s.)
5
Less risk of deflation
Number of OECD countries with inflation below 1%
Source: OECD
0
5
10
15
20
25
30
2011 2012 2013 2014 2015 2016 2017
6
Interest rates in US, euro area and Sweden
-1
-0.5
0
0.5
1
1.5
2
2.5
2014 2015 2016 2017 2018 2019
US
Euro area¹⁾
Sweden
1) ECB’s deposit rate. Eonia from 2017 Q3.
Sources: Bloomberg, Thomson Reuters and Norges Bank
7
Policy rates and estimated forward rates at 11 May
The US dollar has appreciated
-0.5
0
0.5
1
1.5
2
2.5
60
70
80
90
100
110
120
2009 2010 2011 2012 2013 2014 2015 2016 2017
Effective USDexchange rate(l.h.s.)
US interest ratedifferential againstother countries¹(r.h.s.)
Effective US dollar exchange rate, index. Interest rate differential against other
countries, percentage points
1) 10-year government bond yields. External interest rates are calculated as a weighted average of German, Japanese, UK, Canadian and
Swiss interest rates.
Sources: Bloomberg and Norges Bank 8
US dollar appreciation may have coincided
with debt crises in emerging economies
9
Effective US dollar exchange rate, index. Number of crises.1) Periods of US dollar
appreciation (shaded areas)
1) Based on Catão and Milesi-Ferretti (2014). Crises are defined as defaults or restructurings of external debt, as well as
instances where countries have received considerable IMF support.
Sources: Bloomberg, IMF and Norges Bank
0
1
2
3
4
5
6
7
8
60
80
100
120
140
160
180
1980 1985 1990 1995 2000 2005 2010 2015
Number of crises(r.h.s.)
Effective USDexchange rate (l.h.s.)
Global imbalances
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2002 2004 2006 2008 2010 2012 2014 2016
Rest of world
US
Oil-exportingcountries
China
Euro area
Current account. Percent of global GDP
Source: IMF 10
Agenda
Global economy – Brighter near-term outlook
– But heightened uncertainty
Oil market – Is USD 50 the new price path?
Norwegian economy – The economy has turned the corner
11
Global balance for the oil market
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
84
86
88
90
92
94
96
98
100
2013 2014 2015 2016 2017
Implied inventorychanges (r.h.s.)
Globalconsumption
Global production
In millions of barrels per day. 2013 Q1 – 2017 Q41)
1) Estimates from 2017 Q2. OPEC’s crude oil production from 2017 Q2 is estimated on the basis of OPEC’s production in April.
Sources: IEA and Norges Bank 12
Active rigs and production in the US
Production in millions of barrels per day.
Source Thomson Reuters
6.5
7
7.5
8
8.5
9
9.5
10
2013 2014 2015 2016 2017
200
400
600
800
1 000
1 200
1 400
1 600
1 800
Active rigs (l.h.s.)
Production (r.h.s.)
13
Oil price
USD per barrel. January 2014 – December 20201)
1) Futures prices for May 2017 (broken lines) are the average of futures prices for the period 12-18 May 2017.
Sources: Thomson Reuters and Norges Bank
14
0
20
40
60
80
100
120
140
2000 2005 2010 2015 2020
Agenda
Global economy – Brighter near-term outlook
– But heightened uncertainty
Oil market – Is USD 50 the new price path?
Norwegian economy – The economy has turned the corner
15
Norway: The economy has turned the corner
0
1
2
3
4
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GDP mainland Norway.1) Volume. Annual growth. Percent
1) Projections for 2017-2020 from MPR 1/17.
Sources: Statistics Norway and Norges Bank
16
Unemployment
As a percentage of the labour force. Seasonally adjusted
1) Hordaland, Møre og Romsdal, Rogaland and Vest-Agder.
Sources: Norwegian Labour and Welfare Administration (NAV), Statistics Norway and Norges Bank
0
1
2
3
4
5
6
2010 2012 2014 2016 2018 2020
Registeredunemployment
Labour force survey(LFS) unemployment
Registeredunemployment, oil-dependent regions1)
17
Oil investment close to bottoming out
Constant 2015 prices1). In billions of NOK
1) Projections for 2017-2020 from MPR 1/17.
Sources: Statistics Norway and Norges Bank
50
100
150
200
250
300
350
2000 2003 2006 2009 2012 2015 2018
Other businessinvestment
Oil investment
Housing investment
18
The key policy rate has been lowered
Percent
Source: Norges Bank
0
1
2
3
4
5
6
7
2008 2010 2012 2014 2016 2018 2020
Forecast, March 2017
Forecast, March 2014
Key policy rate
19
Oil price and krone exchange rate
20
Oil price1) and import-weighted exchange rate index2)
1) Brent Blend. USD/barrel.
2) A positive slope denotes a stronger krone exchange rate.
Sources: Thomson Reuters and Norges Bank
85
90
95
100
105
110
11520
40
60
80
100
120
2014 2015 2016 2017
Oil price (l.h.s.)
I-44 (r.h.s.)
Improved competitiveness
21
Labour costs in Norway, relative to trading partners’ labour costs1). Index2)
80
90
100
110
120
130
140
1995 1999 2003 2007 2011 2015
Measured in domesticcurrency
Measured in a commoncurrency
1) Hourly labour costs in manufacturing.
2) Index 1995 = 100.
Sources: Statistics Norway, Norwegian Technical Calculation Committee for Wage Settlements (TBU)
and Norges Bank 21
Historically low wage growth
-2
-1
0
1
2
3
4
5
6
7
1995 2000 2005 2010 2015 2020
Nominal wages
Real wages
Annual growth. Percent. 1995–2020
Sources: Statistics Norway, Norwegian Technical Calculation Committee for Wage Settlements (TBU) and Norges Bank
22
Inflation is falling
Twelve-month change. Percent
0
1
2
3
4
5
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CPI
CPI-ATE
Sources: Statistics Norway and Norges Bank
23
House prices have risen sharply
NOK per square metre
Sources: Eiendomsverdi, Finn.no, Real Estate Norway and Norges Bank
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
2003 2005 2007 2009 2011 2013 2015 2017
Norway
Oslo
Stavanger
24
Forecast for the key policy rate
Norges Bank’s Executive Board, March
2017:
The Executive Board’s current assessment of
the outlook suggests that the key policy rate will
most likely remain at today's level in the period
ahead.
Norges Bank’s Executive Board, May
2017:
The outlook and the balance of risks for the
Norwegian economy do not appear to have
changed substantially since the March Report. The
key policy rate has therefore been kept unchanged
at this meeting.
Percent
Source: Norges Bank
-1
0
1
2
3
2010 2012 2014 2016 2018 2020
March 17
25
OUTLOOK FOR THE
NORWEGIAN AND GLOBAL
ECONOMIES
GOVERNOR
ØYSTEIN OLSEN
Gardermoen, 23 May 2017