Norway rules out extra economic stimulus

Norway's government has insisted there is no crisis in the country and ruled out any immediate extra stimulus for the economy after holding its first emergency meeting with the central bank governor since the global financial crisis in 2008.

Erna Solberg, the centre-right prime minister, said on Friday that falling oil prices and investment was putting pressure on the main driver of Norway's prosperity. "This is the new reality. There is no doubt that the need for restructuring [of the economy] is pressing," she said after the meeting with Oystein Olsen, governor of Norges Bank.

Siv Jensen, finance minister, stressed that the recent halving in oil prices "is not a crisis" for western Europe's largest oil producer. But she added: "Should the situation get worse, we are willing to come up with necessary extra measures."

Norway's economy is one of the world's most oil dependent. However, it is cushioned by the government having squirrelled away most of its petroleum revenues in the world's largest sovereign wealth fund.

The government is allowed to use up to 4 per cent of the $850bn oil fund each year in its budget. It plans to use a record amount in 2015, but the proposed sum only amounts to about 3 per cent of the fund, giving significant room to boost public spending.

"Probably there is a bit of panicking here from the government," said Thina Saltvedt, analyst at Nordea, the bank. "I think it is a bit too early to start with [extra stimulus]: it is not a crisis yet. [Oil] is putting the brakes on for sure, but we need the oil industry to become more competitive."

Ms Solberg said before the meeting that she wanted Mr Olsen to brief her on the state of the Norwegian economy, given the "significant challenges" the country faced because of the oil sector's woes.

Her concerns were underlined by NPD forecasts that oil investments would total NKr147bn this year, down from a forecast of NKr180bn a year ago. The NPD expects them to fall to NKr135bn by 2017. But the drop could well be more, as the estimates were based on the oil price during the autumn. "If the oil price stays in the $50-$60 range, investments could fall further," said Beate Nyland, head of the NPD.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

Ακολουθήστε το Euro2day.gr στο Google News!Παρακολουθήστε τις εξελίξεις με την υπογραφη εγκυρότητας του Euro2day.gr

FOLLOW USΑκολουθήστε τη σελίδα του Euro2day.gr στο Linkedin

The central bank cut interest rates at the end of last year and is expected to do so again at or ahead of the next rate setting meeting in March. The krone has fallen to multiyear lows against the euro and dollar, which will help the competitiveness of exporters but could also lift inflation.

Wood Mackenzie, the energy consultancy, warned that investments would fall by about a quarter this year in Norway even as production rose slightly. "The current uncertainty over the oil price and future project returns means that cuts in exploration, deals and development spend will be unavoidable," said Malcolm Dickson, an analyst at the consultancy.

Perhaps the greatest uncertainty surrounds projects in the Arctic where several oil discoveries have been made in the Barents Sea. Analysts expect Statoil to delay the development of its Johan Castberg field there for a third time, but the Norwegian state-controlled company this week said only that it was working "to make a positive investment decision - with a timeline towards the summer".

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation