Among Norway’s trading partners, which are dominated by advanced European economies and the US, growth has picked up from the very low post-crisis levels. Unemployment has decreased considerably in a number of countries. In the April issue of the International Monetary Fund’s (IMF) semi-annual report, a moderate pickup in global growth is projected for the years ahead. At the same time, there is considerable uncertainty about international developments. Signals of rising protectionism and global political unrest may reduce economic growth. Inflation among Norway’s trading partners is still low, but has recently edged up, partly as a result of higher energy prices. Inflation can be expected to gain further momentum ahead as activity in trading partner economies picks up. While inflation is rising and growth prospects are improving, global interest rates may have passed their lowest point. Expected money market rates indicate that short-term interest rates among trading partners will rise in the years ahead. However, interest rates will probably remain low, compared with pre-crisis levels, for an extended period of time. Chart: US, euro area and Swedish interest rates Short-term interest rates have been on the rise in the US for some time, after the Federal Reserve began to raise the policy rate towards the end of 2015. In the euro area, the policy rate has been negative since 2014, with the latest reduction made by the European Central Bank (ECB) in March 2016. Market participants expect the first policy rate rise in the euro area to occur in the course of next year.

Chart: Relative labour costs Improved cost-competitiveness is an important factor in enabling new exports to emerge as the production of oil and gas dwindles. Tourism in Norway has risen markedly in recent years, and exports of traditional manufactured finished products have shown an appreciable increase. However, the increase is not sufficient to compensate for a decrease in exports from other sectors of the mainland economy. Total mainland exports were lower last year than in 2014. The most important reason for this is the marked decrease in oil service industry exports in the wake of the fall in oil prices. But even excluding this part of the export industry, growth in mainland exports since 2014 has been lower than growth in trading partner imports. Chart: Mainland exports Weak export growth partly reflects supply-side constraints in some sectors. Production stoppages at several large companies led to a decrease in industrial commodity exports last year, while salmon lice infestations contributed to a decline in seafood exports. Other service sector segments in addition to the oil service industry also appear to have been adversely affected by the downturn in the global petroleum industry. A weaker krone is also an advantage for Norwegian firms competing in the domestic market. Competitiveness in the oil service industry has improved considerably, particularly after the substantial cost-cutting measures introduced by companies in this industry in recent years. We have recently seen that a larger share of contracts on the Norwegian continental shelf is being awarded to Norwegian companies.