NORWAY: NO CRISIS
The finance minister of Norway, Western Europe's biggest oil producer, said on Friday that she would sanction extra fiscal stimulus if the economic outlook were to worsen further but for now her budget plan for 2015 still holds despite the rapid drop in crude prices.
Norway's oil revenues have been hit hard by a 50% drop in prices over the past six months and oil companies operating in Norway are set to reduce their capital expenditure by 15% on the year in 2015, the government's petroleum directorate said in a report on Thursday. About 1 in 11 workers in Norway are employed by businesses exposed to the oil sector.
After consultations with the head of the central bank and the prime minister on Friday—described as a "crisis meeting" in local media—Finance Minister Siv Jensen sought to downplay the need for the government to act now to support the economy.
"Some are quick to use the word crisis. I want to underline that this is not a crisis," she said. Ms. Jensen said monetary policy and the exchange rate had proven to be useful "shock absorbers" for the economy so far, as had the country's sovereign-wealth fund and solid banking sector.
She said Norway's unemployment was low, its employment rate was high and the economy was growing. "This is a good starting point for an economy facing an adjustment," she said.
Concerns have been rising that the country could be in for a hard landing after years of healthy growth and rising levels of prosperity. Analysts had wondered ahead of the meeting on Friday whether the government might launch new measures to support the economy, such as investments in infrastructure projects.
"If the situation gets worse, we are ready to present the measures that are needed, for now we think the budget is well suited to the situation," Ms. Jensen said.
The budget for this year included plans to spend more of Norway's oil money, which it keeps in the world's largest sovereign-wealth fund, as well as a cut on a tax on wealth.
Norway's main defense against the slump in oil has so far been monetary policy, and a lower oil price was cited by the central bank when it lowered its main interest rate to 1.25% in December, and signaled a 50% chance of another cut within six months.
As the oil price has fallen, the Norwegian krone has weakened to around 7.60 kroner to the dollar from 6.10 kroner last summer which has helped the competitiveness of Norway's big exporters such as the fertilizer producer Yara and aluminum producer Norsk Hydro .
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