In Thursday’s annual address recommended Governor Øystein Olsen restructuring and a painful break with the economic policy over the past 15 years.
According to Norwegian dictionary means restructuring either “in a different order” or “adapt to new conditions.” But how repositions the wallet? Five economists answer what economic restructuring means for you:
1. Housing market
Steinar Holden, professor at the Department of Economics at the University of Oslo, believes the reported decline in oil activity will lead to higher unemployment, which will have a negative impact on the housing market. In return he believes interest rates will be low even longer.
– The reorganization means that we build up new industries at the expense of industries that built down. So-called skilled jobs are typically in suburban areas, as opposed to industrial jobs that have been in rural areas. This will perhaps be able to reinforce the tendency in pressure areas. About house price inflation will be higher. If we do not repositions us, the growth in the economy weaker. With restructuring we keep momentum in the economy, but it also means high house prices, says Øystein Dørum manager at DnB Markets.
2. Interest rates
– Restructuring shall keep the economic activity up. Then it is unreasonable to bet on zero rate. In Norway we have a small open economy with free capital movements. If interest rates in the countries around us remains weak long, Norges Bank may also be pushed in that direction. The better we are at restructuring, the less likely it is that we get a zero interest rate in Norway, says Dørum.
Chief Economist Elisabeth Holvik Sparebanken1 supports prediction that Norges Bank will reduce the interest rate in the years ahead, due to monetary policy Europe and neighboring countries.
– Currently we can not exclude zero rate. This will provide a less favorable situation in the export sector and lower activity in the oil sector. Again this will lead to higher unemployment and lower wage increases in the coming years, says Holvik.
3. The labor
Employees in the oil industry and supplier industries account for 10 percent of employment in Norway.
– Probably the blue-blue government increasingly spending money on tax cuts and public investment, and it provides enough fewer jobs in the short term than if they had increased public employment, says Holden.
Norway’s economic history is a tale of restructuring. It has also helped us to retain the wealth.
– A half million Norwegians changing jobs voluntarily or involuntarily every year. Norway has also managed major restructuring earlier, says Stein Reegård chief economist LO.
– Many of textile workers and industrial workers are gone and people are replaced by machines. We have got a very good help from a very profitable industry, oil industry, and realignment away from the industry, will be heavier than previous restructuring. Restructuring has affected the Norwegian economy and helped us to keep the wealth, says Dørum DnB Markets.
4. Environment
Low oil ensures that oil and gasoline are still attractive, and it may delay the transition to cleaner forms of energy.
Lower oil activity leads to less labor to Norway and thus less greenhouse gas emissions in Norway. Lower oil activity will also have a beneficial effect on greenhouse gas emissions in the world, says Steinar Holden, professor at the Department of Economics, University of Oslo.
Reegård recalls that Norway already has a strong tradition of renewable energy such as hydropower.
– We must remember that there is nothing easier to create jobs in renewable energy than in other sectors. But many who currently work in the oil industry can find a future in renewable sector, says Stein Reegård chief economist LO.
5. Government’s efforts
– A downturn in the economy will have great significance for policy. It becomes easier to justify increased use of fiscal instruments, which Norway is so lucky to afford. Most often it is beneficial to sit in government in good times, although we have e.g., R that voters support the government in hardship times. It depends on how well we believe that the government tackles the actual realignment, says Holden.
If you ask the government what plans they have to adjust the economy, I think you get fumbling response. Governor comes with this warning because it is a real problem. It may be an advantage for a hard-pressed government help to explain how the land lies, says Stein Reegård chief economist LO.
Holvik Sparebanken1 alerts several investments over the public budget and believes that a greater financial downturn will increase the activity of the state budget.
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