krone. in the autumn of 2002 and into 2003, growth in the global economy moved on a different path and was substantially weaker than norges bank and other observers had expected. weak developments in the global economy resulted in lower interest rates abroad and a wider interest rate differential between norway and other countries. developments in international equity markets and the risk of higher oil prices also contributed to strengthening the krone. a persistent downturn abroad, the likelihood of lower wage growth in norway and a strong krone have led to reductions in the interest rate of more than 5 percentage points since december 2002. the sight deposit rate has been 1. 75 per cent since march this year. monetary policy easing has been aimed at bringing inflation up towards the target of 2. 5 per cent and stabilising developments in output and employment. the decline in interest rates since december 2002 has contributed to weakening the krone. measured by an index of 44 trading partners ( i - 44 ), the krone depreciated through 2003 by almost 11 per cent from its strongest level in january of the same year. the krone has fluctuated moderately in 2004. high oil prices and low interest rates abroad have curbed the effect on the krone of the fall in norwegian interest rates. the krone has stabilised - though at a high level considering the inflation outlook. consumer price inflation in norway declined sharply through 2003. a number of factors appear to have contributed to the decline. • the appreciation of the krone through 2002 contributed to a low rise in prices for imported goods. • at the same time, a change in trade patterns and external economic conditions have resulted in an unexpectedly sharp fall in import prices, even when measured in terms of what norwegian importers pay in foreign currency. the change in trade patterns has made a considerable contribution to the sharp decline in prices for clothing, footwear and audiovisual equipment. rapid technological advances have also pushed down prices for audiovisual equipment. • intensified competition in retail trade and other service sectors. lower prices for imported consumer goods were an important reason for the low rate of inflation recorded in 2003. so far in 2004, services where wages are not the dominant factor have made the most substantial contribution to low prices. house rents have also exerted downward pressure on inflation. norway is not the only country where inflation has been low. in sweden, underlying inflation has fallen sharply. excluding energy prices, underlying inflation stands at 0. 7 per cent. inflation has also slowed in finland and

the current krone exchange rate is close to 15 per cent higher than in the mid - 1990s and about 4 per cent higher than the average for the past 30 - 35 years. norwegian businesses are losing market shares partly because of the strong krone. the international division of labour is shifting, and in the face of major restructuring it is a disadvantage for norwegian business and industry that costs are high. in 2003, both employment and investment fell, although investment picked up somewhat towards the end of the year. efficiency - enhancing measures will probably continue to mark developments in the business sector this year. this will curb demand for labour and investment growth. strong competition has resulted in substantial restructuring. in norway and other countries, manufacturing production is being moved to countries with lower costs. petroleum investment is also rising this year and investment growth may continue to be strong in 2005. petroleum investment has traditionally had a considerable influence on cyclical developments in norway. if investment in 2005 is as high as estimated in the most recent investment intentions survey for oil and gas operations, petroleum investment will make a strong positive contribution to the norwegian economy. oil price developments have mixed effects on the norwegian economy. persistently higher oil prices contribute to higher petroleum investment and increased activity in sectors affected by petroleum activities. a sharp rise in oil prices, however, has restrained global economic growth and affected demand for our other export products. increased petroleum investment and exploration activity offshore are providing an impetus to the business sector in the north - west. this is reflected in an increase in incoming orders to the shipyards, following a long period of sluggish activity. the willingness to invest is rising. the region is very export - oriented. the county of sogn og fjordane is norway ’ s second largest in terms of exports per inhabitant, while møre og romsdal ranks third. after declining in recent years, exports have now picked up in both counties. møreforskning in molde relays information regularly from our contact enterprises in sogn og fjordane and møre og romsdal. in september, these enterprises reported a rise in demand and output in all industries, with the exception of the fishing and fish processing industries. output in the construction industry, retail trade and manufacturing output focused on the construction industry have also picked up. the public sector reports considerable investment needs, for example in connection with health sector projects. this snapshot report on the current situation in this part of the country and similar reports from the other regions