Norwegian borrowers, businesses and industry could heave a sigh of relief Thursday when the country’s central bank decided not to raise interest rates and signaled that rates will stay low until next summer. At a shut-down cellulose plant in Tofte, meanwhile, companies have been lining up to hire laid-off workers.
Low rates suggest that Norway’s strong currency, the krone, will also likely be kept from getting even stronger. That’s good news for Norwegian industrial firms and exporters who already face tough price competition. The value of the krone has fallen a bit in recent weeks, but its relative strength still makes exporters’ products even more expensive.
The central bank’s board opted to keep its “key policy rate” at 1.5 percent and suggested it would be a long time before it’s raised. “The analyses imply a key policy rate at today’s level in the period to summer 2014, followed by a gradual increase to a more normal level,” said Jan F Qvigstad, deputy governor of Norges Bank. Øystein Olsen, the head of the central bank who normally announces interest rate news, is on sick leave following a hip operation, reported website dn.no.
Qvigstad noted that consumer price inflation has been higher than projected and the krone has depreciated, but growth in the Norwegian economy also has been lower than projected. “Against this background, the key policy rate was unchanged,” he said, adding that current prospects suggest the inflation rate will remain just below 2.5 percent also in the coming years.
The bank board also referred to how interest rates abroad are “very low” with inflation prospects low as well. “Output and employment prospects in Norway have weakened slightly, but capacity utilization is expected to remain close to a normal level ahead,” the board stated.
Optimism amidst gloom
Industrial plant shutdowns remain a concern in Norway, such as when the Södra Cell Tofte cellulose firm halted production at the end of August. It was the latest in a string of timber mill closures but there’s been some good news lately for the nearly 300 workers who lost their jobs in Tofte, a small town at the southern tip of the Hurum peninsula between Drammen and Oslo.
Newspaper Aftenposten reported this week that even though the overall mood in Norwegian business and industry has dampened, with national employers and business organizations releasing their bleakest prospects since 2009, nearly all the laid-off workers at Tofte are being offered new jobs. On Monday, the local chapter of state welfare and employment agency NAV helped mount a job fair that attracted 43 companies with 160 available jobs.
“We got the feeling that many (of the laid-off Tofte workers) were recruited directly at the job fair,” Jon-Harald Thorsås of NAV Hurum told Aftenposten. Companies like Siemens, Hydro and Borregaard were among those coming with job offers, he added, while the oil-related firms were also very interested in snatching up the Tofte plant’s experienced industrial employees.
The laid-off workers at Tofte were also all offered severance packages of at least six-months’ pay from October 1, and Thorsås now expects many will soon find new jobs as well. “If you’re willing to commute an hour from Tofte, you’ll get a new job,” he said. “These are attractive workers with their papers in order.”
Jostein Sjaavaag, who formerly headed the main labour organization at the cellulose plant, was also optimistic. “I have faith that most will get new jobs,” he told Aftenposten. “Engineers and skilled workers are attractive in the labour market.” NAVofficials in Moss and Ringerike, where other plants have shut down, say most of their employees also have since found new work, even though many had to start commuting.