While the rest of Europe has enormous economic problems, Norway is still well placed on a golden branch, says the recent City Bank’s new report.
While the Euro zone is still in recession, the UK is stagnating, other Scandinavian countries are weak, and Switzerland is undergoing deflation, Norway stands out with growth and a solid financial position. These are the statements by analyst at Citi Bank, Tina Mortensen.
"While we are pessimistic about the outlook for most European economies, we expect that Norway will continue to exceed expectations (which has also been the case in eight of the last nine years)," writes Mortensen in the report.
She believes gross domestic product (GDP) of the Norwegian mainland will grow by 2.8 percent from 2013 to 2014, and says this will lead the banks to initiate tightening measures earlier than other countries.
Mortensen points two drivers behind the strong Norwegian eceonomic growth: Low interest rates and, gas and oil reserves.
Low interest rate is a big advantage since 95 percent of Norwegians have mortgages with floating interest rates. Historically low interest rates, and expectations of continued low interest rates free up household disposable assets. In addition, rising stock markets, unemployment remains low and house prices are rising.
Also, the large gas and oil reserves, and the use of oil revenues has allowed Norway to build up huge profits and government assets. The guidelines allow for expansionary monetary policy since the fund is growing much faster than GDP, writes the CITI analyst.
She adds that the biggest risks ahead is a contagion from the euro crisis. In addition, high levels of debt among the population and high house prices are the risks in front of the Norwegian economy.