The Norwegian government believes the global financial crisis is not over, and intends to spend its way out of it. Norway’s business community, however, is growing increasingly optimistic and thinks the economy is turning around. A new business cycle barometer set off plenty of good signals this week.
Finance Minister Kristin Halvorsen proposed a budget that calls for record high use of Norway’s “oil fund,” specifically the gains on revenues set aside for future generations. She told the Norwegian Parliament on Tuesday that “the crisis is not over,” and that the government should boost spending to ward off unemployment.
Newspaper Dagens Næringsliv (DN) , meanwhile, released the findings of a business cycle barometer that rose strongly for the second quarter in a row. A survey behind the barometer questioned 2,000 business leaders nationwide about their expectations for the next 12 months.
Roughly a third planned to increase the number of their employees. Less than 10 percent planned any staff cuts.
The vast majority expressed optimism in a wide variety of branches. Only 14 percent expected lower profitability during the next 12 months.
“DN’s barometer shows that the economy is regaining its footing again,” said Harald Magnus Andreassen, chief economist at First Securities in Oslo. He thinks Norwegians can expect “moderate growth” once again.
He and other economists thought Halvorsen should thus begin a careful slowdown in government spending and introduce a tighter state budget for 2010. Instead, she did the opposite and now some business leaders and economists worry that inflation and interest rates will rise, and the Norwegian currency will get even stronger.
That in turn can hurt Norway’s important export industries, because their products will be less competitive. Revenue generated in US dollars, like those from oil, will decline.
Prime Minister Jens Stoltenberg, defending Halvorsen’s budget, said any tightening likely won’t begin until next year. In the meantime, the government intends to invest in everything from the police to nursing homes to schools and transportation projects, to name a few.