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Norway Country Risk Report Q1 2016

Norway Country Risk Report Q1 2016

Core Views

A sharp slowdown in hydrocarbons sector investment amid a collapse in global oil prices will weigh on Norwegian GDP growth between 2015-2017.

The Norwegian government will continue to expand fiscal policy in order to stimulate demand in the short run and to lay the structural foundations for stronger non-hydrocarbons growth over the longer run.

The residential housing market has been a major contributor to overall real GDP growth for most of the past decade, but is set to cool over the next few years.

We envisage broad political continuity to the next election in 2017, with the Conservative-Progress minority coalition government achieving modest progress on its reform agenda.


Executive Summary
Core Views
Key Risks
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Budget A First Step To Reduce Oil Dependency
The Norwegian government's 2016 budget will pass without significant opposition, though it will require dipping into the country's
sovereign wealth fund. The budget includes a series of tax cuts and investment-friendly measures, in recognition that the country's
hydrocarbons-centred economic model needs to change and productivity in the non-oil sector needs to increase.
TABLE: POLITICAL OVERVIEW
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Slow Transition Away From Oil
The reshaping of the Norwegian economy in the post-oil boom era has begun, but progress has been slow thus far. We forecast flat
real GDP growth of 1.3% annually from 2015-2017, accelerating modestly thereafter as the economy makes a slow shift away from
hydrocarbons dependency.
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE : GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
Monetary Policy
More Easing To Come, But NOK To Stabilise
Norway's central bank will ignore near-term inflation pressures and cut its key policy rate in early 2016 to a new record low of 0.50%.
With central banks in key trading partners (notably the eurozone) easing policy more aggressively, however, the krone should stabilise
alongside oil prices in 2016.
TABLE: NET EXPORTS FORECASTS
Chapter 3: Operational Risk
SWOT Analysis
Operational Risk Index
Chapter 4: BMI Global Macro Outlook
Global Outlook
Exit The Dragon
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %

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