Norway’s central statistics bureau SSB has issued some optimistic reports that predict high oil prices and low interest rates over the next few years. Newspaper VG reports that Finance Minister Sigbjørn Johnsen may see an extra NOK 250 billion (nearly USD 40 billion) flowing into state coffers.
SSB also has reported that it thinks Norway’s Central Bank will postpone raising interest rates any more this year, and that the next interest rate hike won’t come until well into 2011.
The reason: Europe’s economic crisis and problems affecting countries near Norway. Exports may already be hit by less purchasing power in key markets. Norway’s central bank will likely be reluctant to make exports even more expensive by raising interest rates, which can further strengthen the Norwegian krone.
Moreover, when interest rates aren’t rising abroad, it will take longer for them to be raised domestically. “We think (retiring Norges Bank boss Svein) Gjedrem has raised rates for the last time,” SSB researcher Torbjørn Eika told newspaper Aftenposten. “And it will probably be another half-year before his successor can begin to raise rates.”
Interest rates were last raised, to 2 percent, in early May. Several other economists agree that low rates will prevail, perhaps even “for many years,” according to Jan Andreassen, chief economist at Terra Gruppen.
Meanwhile, SSB also reported that it thinks oil prices will stay high, and perhaps even reach record highs. The oil spill crisis in the Gulf of Mexico has at least temporarily halted deep water drilling and hit oil and gas exploration projects worldwide.
SSB thinks the price of oil will rise to NOK 530 a barrel next year, up from NOK 488 this year, and then jump to NOK 578 a barrel in 2012 and NOK 621 (USD 95 at current exchange rates) in 2013.
“These are powerful numbers and one of the highest oil price prognoses ever from SSB,” Terje Strøm of research firm NyAnalyse told newspaper VG.
This year’s state budget for Norway is based on an oil price of NOK 475 per barrel. Anything over that will represent unanticipated money into the treasury. If SSB’s figures are realized, it will mean extra state funds of NOK 45 billion next year, NOK 85 billion in 2012 and NOK 120 billion in 2013, according to NyAnalyse.
Harald Magnus Andreassen of First Securities told VG that he thinks most of the extra money will end up in the so-called “Oil Fund,” the state pension fund that invests overseas, and won’t be used for immediate public consumption.
Views and News from Norway/Nina Berglund
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