to be low – and kept unchanged. today, with an inflation target, inflationary pressures will be steered using the interest rate, while the value of the krone will fluctuate. today, this sentence would have to read : “ the risk of an exchange rate that is too strong must be given considerable weight when decisions are to be taken here ”. we are now in a period where petroleum wealth is being invested in foreign financial assets via the government petroleum fund. the government is to gradually phase in petroleum revenues into the domestic economy by using approximately the expected real return on the fund. the fiscal rule was established in 2001. growth in public expenditure started to accelerate in 1997 after having been low in the mid - 1990s. spending growth has also been fairly strong in recent years, but perhaps somewhat slower than earlier. since 2000, spending growth has averaged 6. 3 per cent, while gdp growth in value terms has been 4. 5 per cent. we have limited overall knowledge about real growth in public service production. reliable measures of productivity and price developments have not been developed. the fiscal rule for the budget implies that the government can use 4 per cent of the fund over time. this year, a little more than 6 per cent is being used. the deviation partly reflects an unexpected shortfall in tax revenues in recent years. the government budget deficit is the difference between total revenues and total expenditure. they each account for about half of total gdp in norway. even small deviations from expenditure and revenue projections can have a major impact on the deficit. exchange rate changes will also lead to fluctuations in the value of the petroleum fund. for these reasons alone, the use of petroleum revenues may in periods deviate from the 4 per cent rule. spending was also increased in response to the economic downturn. we can therefore safely affirm that the fiscal rule has been normative for fiscal policy. in the years following 1997, with strong growth in public expenditure, the fiscal rule pointed to a continued increase in the use of petroleum revenues. we had to expect this growth in spending to lead to deteriorating competitiveness in norwegian manufacturing, either through higher wages or an appreciation of the krone. with stronger wage growth in norway than abroad, the competitiveness of norway ’ s manufacturing industry has weakened by about 15 per cent since the mid - 1990s. competitiveness is about 5 per cent weaker than the average for the past 30 years. the krone exchange rate has been influenced by high oil and gas prices and prices for

to alleviate the situation. central banks have cut policy rates and taken extensive measures to stabilise financial markets. the sharp global downturn amplifies the challenges for a small open economy like norway. chart : marked fall in oil prices 1 / 4 bis central bankers'speeches on top of this, there has been a substantial fall in oil prices as a result of a sharp fall in global oil consumption. despite production cuts, total oil production is substantially higher than consumption, with little spare storage capacity. against this background, oil prices are likely to remain low in the coming period. futures prices indicate that oil prices will pick up, but to a markedly lower level than the level we have been used to seeing in recent years. there were already prospects at the beginning of the year that petroleum investment would decline. owing to the fall in oil prices, oil companies have cut their investment plans. low oil prices affect the outlook for the norwegian economy. chart : substantial krone depreciation the fall in oil prices and general uncertainty in the wake of the coronavirus outbreak have weakened the krone exchange rate. on 19 march, the krone hit record - weak levels against a number of currencies. at that time, uncertainty in the nok market was particularly high, and limited liquidity contributed to amplifying nok movements. against this background, norges bank announced that there could be a need to intervene in the nok market. in order to support a wellfunctioning nok market, norges bank has made extraordinary nok purchases totalling nok 3. 5 billion in the foreign exchange market. chart : money market turbulence financial market volatility also led to high credit premiums. as a result, the spread between the policy rate and the norwegian money market rate, nibor, widened markedly in march. nibor is an important reference rate and has a significant impact on the rates offered by banks. as shown in the chart, nibor has recently fallen and the spread of nibor over the policy rate is now close to a normal level, reflecting the large - scale measures taken by central banks, including norges bank, to supply liquidity to the market. norges bank has provided extraordinary f - loans for banks in several rounds, in nok and usd. an important aim of these measures is to ensure that changes in the policy rate pass through to banks ’ lending rates and to market rates. chart : policy rate reduced to zero according to the regulation on