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