Mr Gjedrem reports on economic perspectives in Norway Annual address by the Governor of the Central Bank of Norway, Mr Svein Gjedrem, at the meeting of the Supervisory Council of Norges Bank on 18/02/99. Background Twenty-two years ago, in 1977, the Norwegian economy witnessed the onset of a deep crisis. An economic recession in industrial countries, high price and wage inflation in Norway and the expansion of public welfare services resulted in large current account deficits. Thirteen years ago, in 1986, the Norwegian economy was also in a difficult situation. A debt-financed upswing in consumption and investment, a fall in oil prices and a reduction in working hours gave rise to major imbalances in the Norwegian economy. In 1998 clouds again gathered over the economic horizon. Costs rose to a high level in Norway compared with other countries, oil prices fell, and the current account balance deteriorated sharply. This signalled a period of sluggish growth following six years of a strong upswing in economic growth and employment. The krone depreciated and interest rates were raised. There are many features that distinguish the three turning points in economic developments. However, one common denominator is the sudden shift in the assessment of future oil revenues. Fluctuations in petroleum revenues have proved to be a source of instability in the mainland economy. Following the last two turning points, the Norwegian economy went through a period of major restructuring, particularly at the end of the 1980s. Today the situation in the Norwegian economy is different.
The financial sector assessment program jointly carried out by the IMF and the World Bank in 2003 and updated in 2007, together with the associated technical assistance, contributed to strengthening Bank of Algeria’s supervisory tools. As of 2002, the supervisory framework also benefited from the adoption of a regulation on internal control of banks and financial institutions, which requires them to establish an internal control system for their activities and associated risks in order to improve risk assessment, management, and control. The emergence of excess liquidity in the money market since 2002 led to the introduction of new monetary policy tools in order to mop it up effectively. Based on a comprehensive regulation adopted by the Council on Money and Credit in 2005, important progress was achieved in 2006 in modernizing the payment systems, including the real-time gross settlement system for large value and urgent payments and the clearing system for retail payments. The efficiency and safety of transactions occurring through these systems have been strengthened since then, in line with international standards. To improve bank financing of private enterprises, especially SMEs, the government initiated reforms regarding loan guarantees in the 2000s. These include an increase in the level of guarantee (from 50 to 250 million dinars) provided by the Guarantee Fund for Investment Credits (CGCI), the creation of the national investment fund and regional investment agencies, and the introduction of an interest rate subsidy on investment loans.