OECD expects accelerated recovery in Norway without inflation surge

PARIS, Nov 21 (AFP) - Norway is expected to enjoy a clear acceleration of its economic recovery without any damaging increase in inflation in a country where interest rates are already among the highest in Europe, the Organisation for Economic Development and Cooperation said Thursday. As consumer spending picks up, gross domestic product, excluding oil and shipping, is projected to rise by 2.5 percent in 2004, after increases of 1.5 percent in both 2002 and 2003, the OECD said in its twice-yearly Economic Outlook report. The unemployment rate is expected to stabilize at four percent, "with inflation remaining subdued", it said. However, for this positive scenario to occur, Norway's government must stick to its fiscal policy targets and resist the temptation to rely more heavily on oil income to cover extra spending, the OECD warned. Among other downside risks, the OECD cited any further strengthening of the Norwegian krona on the foreign exchange markets, which could strangle export competitiveness. This would be particularly damaging if wages were to rise too fast, limiting the scope for the central bank to cut interest rates to support the economy. phy/jh/vs