starts, reduced order reserves and assessments from the enterprises in norges bank ’ s regional network indicate that housing investment will continue to show a pronounced fall next year. gross investment is expected to decline by 14 per cent on an annual basis in 2009, remain at a low level in 2010 before picking up in 2011. even though the krone depreciation is curbing the impact, the global downturn is expected to result in lower growth in norwegian exports. the high level of petroleum investment was an important driving force during the economic upturn, and petroleum investment is expected to remain high in the years ahead. some investments may be postponed if oil prices fall permanently below usd 60 - 70 per barrel, especially small investments and upgrades of fields in operation. exploration activity may also be cut back. large field development projects are probably being affected only to a limited extent, while small companies and smaller investment projects may be adversely affected by the reduced availability of credit. growth in the norwegian economy slowed markedly in the first half of this year. the effects of the financial crisis will most probably be greater than envisaged only recently. the slowdown in the norwegian economy seems to be occurring rapidly and to be pronounced. mainland growth is projected to be very low in 2009, then recover in 2010 and 2011. petroleum investment will buoy up activity. the central government budget will also boost growth in public demand for goods and services. in the monetary policy report, the results of monetary policy assessments are illustrated in a chart showing projections for the interest rate, inflation and capacity utilisation in the economy. we have illustrated the uncertainty surrounding our projections using fan charts. the width of the fan charts is based on historical disturbances, and therefore expresses the average that covers periods of high and low uncertainty. there is now unusually high uncertainty surrounding future developments in inflation and output and hence surrounding interest rate developments. it is difficult to determine probabilities of different outcomes of the ongoing financial crisis. in such decision - making situations it may be appropriate to implement measures that can reduce the uncertainty and stave off particularly adverse outcomes for the economy. this now implies a more active monetary policy than normal, both in interest rate setting and through liquidity policy measures. when setting the key policy rate, we must also take account of developments in premiums in money market rates, other bank funding costs and bank deposit and lending rates. weight has been given to moving forward the reduction in the key policy rate so that lending rates for households and firms can gradually

going forward, enterprises will probably adjust the workforce to lower output growth and reduce the use of overtime. after a long period of high housing investment and rising prices, activity in the housing market is now slowing. tighter credit conditions are amplifying the fall in house prices. even though there are variations across regions, the trend in house prices is the same – from a more moderate rise at the beginning 2007 to a clear decline at the beginning of 2008. norges bank ’ s lending survey for the third quarter shows that banks are tightening credit standards for households. banks announced further tightening ahead. owing to growing turmoil and liquidity shortages in financial markets, banks have raised their requirements with regard to collateral and borrowers ’ debt - servicing capacity. growth in household credit has slowed in recent months. house price developments affect building starts, which have decreased in the past year. the decline is sharpest for residential building starts. in october, enterprises in norges bank ’ s regional network indicated a very low level of housing starts in the period ahead. order reserves for commercial buildings and holiday homes are high, however. commercial construction is largely financed by loans, and may therefore be affected by changes in interest rate and credit conditions. enterprises in norges bank ’ s regional network report that commercial building starts have declined in recent months. household saving has picked up. household income accounts show that the savings ratio excluding share dividends has risen, but is still very low and negative. household borrowing requirements have also decreased somewhat. ( household net lending has picked up slightly. ) the financial market crisis has led to higher borrowing costs for banks and has kept bank lending rates at a higher level than developments in the key rate would imply. households probably need to build up financial buffers and reduce debt, which will in turn weigh down on growth in private consumption ahead. growth in spending on goods stalled last autumn. there has been a considerable drop in car sales in particular. norges bank ’ s regional network also reports a decline in demand for goods related to moving home, such as white and brown goods and refurbishing equipment. growth in consumption is expected to be very low for a period ahead, but growth in private consumption may pick up again towards the end of next year. growth in mainland investment has been strong in recent years, but is now moderating. according to the national accounts, corporate investment was still on the rise in the first half of the year, but there was a considerable decline in housing investment. falling housing