The public sector employs more than one-third of the labour force in Norway. In Northern Norway, public sector employees account for close to 45 per cent of the labour force. The primary industries are important for the counties in Northern Norway, especially the utilisation of the abundant fish resources in the coastal areas. A large part of the fishing industry is export-oriented and is increasingly competing with low-cost countries. These industries will be vulnerable when the rise in domestic costs is high. There are wide regional variations in unemployment. At the end of July, the number of registered unemployed in Northern Norway came to 4.4 per cent of the labour force, which is slightly higher than the national average of 4.1 per cent. Even though the region has somewhat higher unemployment than the national average, the rise in unemployment in Northern Norway has been relatively low in the last year. Unemployment has only risen half as much in Northern Norway as in the rest of the country. The number of unemployed has risen least in the county of Finnmark in the last year. This is probably related to the industry structure which is characterised by a relatively high share of employees in the public service sector. As I have mentioned, a look at the current situation in this part of the country and similar reports from the other regions represent important information in the work on setting interest rates. The short-term nominal interest rate in Norway has now reached a historically very low level.
High oil prices may also have contributed to curbing the growth rate. GDP growth in important European countries has been low or negative for some time. In the Netherlands, GDP has fallen for three consecutive quarters, and Germany has recorded a contraction over the last two quarters. France’s GDP showed growth in the first quarter and a decline in the second quarter of this year. For the euro area as a whole, preliminary figures show that GDP fell by 0.1 per cent in the second quarter. Some consumer and business confidence indicators have recently shown signs of improvement, and the EU Commission’s estimates point to a slight increase in growth in the next few quarters. There are, however, no clear signs of an imminent and rapid recovery. The key rate in the euro area has been reduced to 2 per cent. Interest rates are expected to remain at 2 per cent to the end of 2003, before rising slightly next year. International business cycles affect the level of economic activity in Norway through a number of channels, including the interest rate differential and the krone exchange rate. Subdued economic growth internationally and high growth in Norway resulted in a wide interest rate differential between Norway and its trading partners. This made it very profitable to invest in the Norwegian krone, and the krone exchange rate appreciated. The appreciation of the krone and high wage growth led to a considerable deterioration in the competitiveness of Norwegian enterprises.