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
5.5
5.0
2012 Apr
4.5
2013 Apr
4.0
2014 Apr
2015 Apr
3.5
2016 Oct
2017 Apr
3.0
2.5
2010
2012
2014
2016
2018
1) Broken lines show IMF projections published in April of the years listed. October for 2016.
Source: IMF
4
Upturn in manufacturing output and global trade
Percentage change from previous three-month period (unless otherwise indicated)
5
55
4
54
3
53
2
52
1
51
0
50
-1
49
-2
2012
48
Source: Thomson Reuters
2014
Global manufacturing
output (l.h.s.)
Global trade (l.h.s.)
Global PMI
manufacturing (r.h.s.)
2016
5
Less risk of deflation
Number of OECD countries with inflation below 1%
30
25
20
15
10
5
0
2011
Source: OECD
2012
2013
2014
2015
2016
2017
6


Interest rates in US, euro area and Sweden
Policy rates and estimated forward rates at 11 May
2.5
US
2
Euro area¹⁾
1.5
1
Sweden
0.5
0
-0.5
-1
2014
2015
2016
2017
1) ECB’s deposit rate. Eonia from 2017 Q3.
Sources: Bloomberg, Thomson Reuters and Norges Bank
2018
2019
7
The US dollar has appreciated
Effective US dollar exchange rate, index. Interest rate differential against other
countries, percentage points
120
2.5
110
2
100
1.5
90
1
80
0.5
70
0
60
2009
-0.5
2010
2011
2012
2013
2014
2015
2016
Effective USD
exchange rate
(l.h.s.)
US interest rate
differential against
other countries¹
(r.h.s.)
2017
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
Effective US dollar exchange rate, index. Number of crises.1) Periods of US dollar
appreciation (shaded areas)
180
160
8
7
6
140
120
100
Number of crises
(r.h.s.)
5
4
3
Effective USD
exchange rate (l.h.s.)
2
80
60
1980 1985 1990 1995 2000 2005 2010 2015
1
0
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
9
Global imbalances
Current account. Percent of global GDP
2
1.5
Rest of world
1
US
0.5
Oil-exporting
countries
China
0
-0.5
Euro area
-1
-1.5
-2
2002
Source: IMF
2004
2006
2008
2010
2012
2014
2016
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
In millions of barrels per day. 2013 Q1 – 2017 Q41)
100
3.5
98
2.5
96
1.5
94
92
0.5
90
-0.5
88
-1.5
86
84
2013
Implied inventory
changes (r.h.s.)
Global
consumption
Global production
-2.5
2014
2015
2016
2017
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.
1 800
10
Active rigs (l.h.s.)
1 600
9.5
1 400
9
1 200
Production (r.h.s.)
8.5
1 000
8
800
7.5
600
400
7
200
2013
6.5
Source Thomson Reuters
2014
2015
2016
2017
13
Oil price
USD per barrel. January 2014 – December 20201)
140
120
100
80
60
40
20
0
2000
2005
2010
2015
2020
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
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
GDP mainland Norway.1) Volume. Annual growth. Percent
4
3
2
1
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
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
Registered
unemployment
6
5
Labour force survey
(LFS) unemployment
4
Registered
unemployment, oildependent regions1)
3
2
1
0
2010
2012
2014
2016
2018
2020
1) Hordaland, Møre og Romsdal, Rogaland and Vest-Agder.
Sources: Norwegian Labour and Welfare Administration (NAV), Statistics Norway and Norges Bank
17
Oil investment close to bottoming out
Constant 2015 prices1). In billions of NOK
350
Other business
investment
300
Oil investment
250
Housing investment
200
150
100
50
2000
2003
2006
2009
1) Projections for 2017-2020 from MPR 1/17.
Sources: Statistics Norway and Norges Bank
2012
2015
2018
18
The key policy rate has been lowered
Percent
7
Forecast, March 2017
6
Forecast, March 2014
5
Key policy rate
4
3
2
1
0
2008
2010
Source: Norges Bank
2012
2014
2016
2018
2020
19
Oil price and krone exchange rate
Oil price1) and import-weighted exchange rate index2)
120
100
85
Oil price (l.h.s.)
90
I-44 (r.h.s.)
95
80
100
60
105
40
20
2014
110
115
2015
2016
1) Brent Blend. USD/barrel.
2) A positive slope denotes a stronger krone exchange rate.
Sources: Thomson Reuters and Norges Bank
2017
20
Improved competitiveness
Labour costs in Norway, relative to trading partners’ labour costs1). Index2)
140
Measured in domestic
currency
130
Measured in a common
currency
120
110
100
90
80
1995
1999
2003
2007
2011
2015
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
21
Historically low wage growth
Annual growth. Percent. 1995–2020
7
Nominal wages
6
Real wages
5
4
3
2
1
0
-1
-2
1995
2000
2005
2010
2015
2020
Sources: Statistics Norway, Norwegian Technical Calculation Committee for Wage Settlements (TBU) and Norges Bank
22
Inflation is falling
Twelve-month change. Percent
5
4
CPI
CPI-ATE
3
2
1
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sources: Statistics Norway and Norges Bank
23
House prices have risen sharply
NOK per square metre
80 000
70 000
Norway
60 000
50 000
Oslo
40 000
30 000
Stavanger
20 000
10 000
0
2003
2005
2007
2009
2011
2013
Sources: Eiendomsverdi, Finn.no, Real Estate Norway and Norges Bank
2015
2017
24
Forecast for the key policy rate
Percent
Norges Bank’s Executive Board, March
2017:
3
March 17
2
 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.
1
Norges Bank’s Executive Board, May
2017:
0
-1
2010
2012
Source: Norges Bank
2014
2016
2018
2020
 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.
25
OUTLOOK FOR THE
NORWEGIAN AND GLOBAL
ECONOMIES
GOVERNOR
ØYSTEIN OLSEN
Gardermoen, 23 May 2017