Norges Bank has also announced that the share of a bank’s borrowing facility that can be based on collateral in the form of bank bonds will gradually be reduced. Covered bonds will continue to be eligible as collateral. Mainland GDP increased in Q2 after two quarters of negative growth. Growth was somewhat higher than expected, reflecting solid growth in public sector demand and private consumption. In September, Norges Bank’s regional network contacts reported that activity had edged up in Q3. The main contribution came from industries providing goods and services to households and the public sector. Despite a moderate rebound in both domestic and international activity, prospects for manufacturing and the building and construction sector remain relatively weak. After falling for a long period, manufacturing production picked up again in July and August. The decline in new orders and order reserves, in the shipbuilding industry among others, nevertheless indicates a low manufacturing production level in the period ahead. According  BIS Review 139/2009  7  to the regional network, manufacturing production is expected to remain unchanged over the next half-year. Overall production in the building and construction sector is also expected to remain virtually unchanged, with increased activity in the construction sector underpinning production. Enterprises in the service sector expect production to pick up over the next halfyear. Regional network enterprises in the retail sector report that production is rising and expect continued growth ahead. The petroleum sector is having a stabilising effect on overall demand via new investment, maintenance and operations.
In this view, it is worth mentioning the positive contribution of the new FDI inflows in tradable sector, which contributed to both higher and more diversified net export and higher employment. In addition, economic recovery was supported by the fiscal stimulus as well as the accommodative monetary policy stance. Since July last year, the main policy rate is at the historical lowest level of 3.25%. Moreover, during the crisis period, a combination of standard and non-standard measures have been undertaken by the central bank aimed to give additional support specifically to the credit growth and accordingly, to the economic growth, while still preserving the price and financial stability in the economy. The outlook for this year is also positive. We expect GDP growth of close to 4%, and therefore we see economy going up on the cycle. What one can learn from our experience is the fact that the implementation of sound structural reforms can definitely move the economy upward – even during the crisis – that is an important message for the macroeconomic policy afterwards. When discussing the recovery from the crisis, we need to point out some related issues that are dealing with the exit of non-standard policy measures and turning towards fiscal consolidation, currently being the topical issues between the policy makers worldwide. The tapering decision by the FED by the end of the last year somehow announced the need of this reversal that will eventually be recognized in other countries, too.