Norges Bank Economic perspectives 15 february 2018  The krone depreciation, combined with moderate wage settlements, has contributed to a marked improvement in business profitability and competitiveness. This has provided a considerable boost to Norwegian firms exposed to international competition. At the same time, an expansionary fiscal policy and lower interest expenses have been important in sustaining domestic demand. This year, the policy rate may be increased for the first time in seven years – this is a good sign. Two years since the cyclical trough was reached in Norway, growth has gained a firm footing and the unemployment rate is approaching a normal level (Chart 15). The impetus from abroad has strengthened and exports are picking up. There is renewed optimism in the petroleum industry. A number of large development projects will contribute to a rebound in oil investment in the coming years. Chart 15 Mainland GDP. Four−quarter change. Percent 4  4  3  3  2  2  1  1  0 2012  0 2013  2014  2015  2016  2017  Source: Statistics Norway  Increased economic activity should lead to a pickup in inflation. On the other hand, the effects of technological advances and a more integrated world economy may continue to exert downward pressure on wage and price inflation. In its conduct of monetary policy, Norges Bank weighs the outlook for inflation against developments in output and employment.
The return on the two asset classes is repre− sented by the fund’s benchmark indexes, measured in foreign currency, for the period June 2011 to May 2012. Sources: Statistics Norway and Norges Bank  Today, the fund is far larger than in 2011. As a result, return variations will have a greater impact. With the current size and composition of the fund, the same return as in 2011 would have resulted in a loss of almost NOK 1 000 billion, or close to 35 percent of mainland GDP. The fund has become important for the Norwegian economy. The fiscal rule links fiscal policy to the value of the fund. This year, 15 percent of general government spending is projected to be financed by transfers from the fund. Looking ahead, movements in global capital markets will be the main source of variation in the value of the fund, and at times in a negative direction. The actual stance of fiscal policy must allow for this uncertainty. The fund had several good years following the euro crisis. Markets turned around, and quickly the loss was more than reversed. We cannot take for granted that this will always be the case. Conclusion Let me conclude. The global economy finally appears to have fully recovered from the prolonged weakness that followed the financial crisis. Growth has also strengthened in Norway after the decline following the oil price collapse. The government’s solid financial position has been of considerable help.