Those policy responses bring us to where we are today by being a cushion to the worst of the Covid-19 impact on the economy. Where we are today The recovery is there, and it is happening. We saw a GDP growth especially in the fourth quarter last year mainly from exports, which have surprised us on the upside. The recovery will be slow and uneven nonetheless. It will be uneven because, while certain sectors particularly manufacturing and exports have done relatively well, services and tourism will be lagging. Households will be hit very hard by the high impact of Covid-19 on tourism and unemployment that I have discussed previously. That is the overall picture. We expect the growth path to be there, but it will not be a rapid or a Vshaped recovery, and it will be slower than other places in the region. Risk to the outlook We had initially been expecting real GDP growth in the mid-three percent this year, but that was before the situation in Russia and Ukraine. We will release a forecast later as our Monetary Policy Committee meets towards the end of this month. As with many countries, we will be lowering our growth forecast and increasing our inflation forecast for this year. We are still looking to see a positive growth number this year and that the recovery will continue despite the substantial pickup in inflation. But what are the risks to that recovery trajectory that we see gradually happening?
With lower oil prices, the economic outlook will deteriorate, but the overall effect on inflation of a marked fall in oil prices and a weaker krone is not clear cut. 8  BIS Review 139/2009  The sharp decline in activity among trading partners has reduced demand for Norwegian export products. The decline in Norwegian exports has occurred slightly later and been somewhat more moderate than observed in a number of other countries. After a sharp fall in exports in the first half of 2009, foreign trade statistics indicate that traditional merchandise exports have increased somewhat this autumn. Norges Bank’s regional network reports that the export industry is expecting approximately unchanged activity over the next half-year. The cost level in the Norwegian business sector is now about 15 per cent higher than the average for the period since 1970, measured in terms of relative wages in a common currency. Since wage growth is higher in Norway than abroad, relative costs will rise ahead even if the nominal krone exchange rate should remain unchanged. This will put many Norwegian firms in a demanding position in terms of international competition, which may influence location decisions ahead. Export growth is expected to pick up ahead, but at a slower pace than expected market growth abroad. The contraction in private investment has been somewhat more moderate in Norway than in a number of other countries over the past year, even though business investment also dropped sharply in Norway.