Norway's Economic Outlook Promotes the need for a Sustainable Economy

November 11, 2014Norwayby EW News Desk Team

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The central bank of Norway has recently elected to keep its interest rates the same, at 1.5%, although they have announced that the economic outlook for the country has darkened. The concerns for the future of Norway's finances have prompted some speculation that the schedule, outlined for rate increases, may be pushed back.

Although the central bank commented that inflation and growth have continued to develop as expected, and the unemployment levels within the country are stable, European growth has been slow this year and global interest are far lower than expected.

The discovery of oil in the 1960s was a factor that contributed to making Norway one of the richest countries in the world, boasting free education and high wages. The country remains centrally involved in the age of oil, with hydrocarbons about 70% of all exports. However, placing all of the country’s needs onto the single foundation of oil is very high-risk and a dangerous strategy. Many people have been asking just what the country is going to do after they run out of oil.

Well, no more free school and health care for one. At some point, the country will have to face the fact that nothing is free in this world.

The Outlook for Norway

The governor of the central bank, Oeystein Olsen has commented that falling oil prices throughout the world, combined with developments abroad, has increased the uncertainty surrounding Norway's economic outlook. The country was expected to see growth of 2.25% this year, which is a rate almost twice as fast as the Eurozone, which is not saying much considering that socialized policies are holding this entire sector back according to financial pundits.

The oil sector contributes a fifth of the entire nation's economy, meaning that a shrinking energy sector could prompt mass unemployment, and a reduced current account surplus.

The mission to find an alternative source for the economy has been the factor on the minds of political and business leaders in Norway for many years now. One suggested solution is the organization known as 'Innovation Norway', a group put forward to act as a business incubator, angel investor, trade council, and promoter.

Energy & Prosperity

However, the organization does not have an easy task ahead of them when it comes to finding an economy that is both green and stable within a country that produces oil. There is nothing wrong with oil, though, as it is a natural substance on earth. How many jobs does being green and stable support?

Playing with the Numbers

The central bank of Norway has predicted one hike in rates for 2016 and one for 2017. Analysts suggest that these hikes may face delays if the oil price fall continues and energy investment falls farther than the predicted 10%. The currency within the realm is already 3% weaker than predicted, and commercial banks have begun to cut down mortgage rates, providing an economic stimulus.

So far, the bank has maintained the key rate of 1.5% since early 2012, and many analysts are expecting it to hold throughout 2015. If this happens, it would be the longest time period at which Norway's rates have remained unchanged.

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