sector. it can take time before such a deterioration translates into lower output and employment. but when the turnaround does occur, it tends to be swift and hard - hitting. it now appears that a new period of downscaling is under way. several factors point to this : first, productivity growth is higher in manufacturing than in other industries. this has resulted in a trend decline in the numbers employed in manufacturing in norway, as it has in other oecd countries. second, manufacturing costs have increased sharply since 1998. up to the summer of 2000, this cost increase was to some extent offset by a weaker krone. the appreciation of the krone has highlighted and exacerbated the deterioration in cost competitiveness. on balance, it appears that cumulative wage growth in norway will be a good 15 per cent higher than in other countries from 1998 to 2003. the krone is now about 7 per cent stronger than the average for the 1990s. third, as a result of the fiscal guideline, the internationally exposed sector is subject to additional pressure. over time, the phasing in of petroleum revenues will lead to restructuring and the transfer of resources from the exposed to the sheltered sector. fourth, the response patterns in stabilisation policy function in a different way from previously. under the “ solidarity alternative ”, the response pattern consisted of countering labour market pressures and strong wage growth by reducing growth in public spending ( or, if appropriate, by strengthening government revenues ). this had a beneficial impact on manufacturing industry. today, monetary policy shoulders more of the burden. this may sometimes result in a strong krone exchange rate. fifth, growth in the global economy is sluggish while, at the same time, oil prices are high. the fall in share prices curbs economic growth among our trading partners. markets for norway ’ s export industries are stagnating, but at the same time high oil prices are providing a stimulus for some sectors of the norwegian economy. interest rates were assessed by the executive board of norges bank yesterday. interest rates were left unchanged. norges bank ’ s key interest rate, the sight deposit rate, therefore remains at 7 per cent. according to norges bank ’ s assessment, with an unchanged interest rate, the probability that inflation two years ahead will be higher than 2½ per cent is the same as the probability that it will be lower. a sharp rise in labour costs is contributing to a relatively high rise in prices for goods and services

chairman, when a country attains price stability, economic growth on sustained basis is likely to follow. accelerated economic growth, of at least 8 % per year, is a sure way of ensuring that most of the mdgs are attained in our developing countries. this has the positive impact of reducing poverty levels of the people as it increases their disposable incomes and eventually improve their standard of living. ( f ) reduction of poverty usually, some people think that achievement of low inflation is not important to the achievement of mdgs. this assertion should be dismissed using macroeconomic analysis and modelling, which i expect the participants at this workshop to actively be involved in. even a simple econometric analysis will show that high inflation in a country erode peoples ’ disposable incomes and, therefore, reduces their purchasing power, particularly the vulnerable that may not have the resources and skills to hedge or protect themselves against http : / / www. unmillennuimproject. org / reports / fullreport. htm. the effects of high inflation. attainment of low and stable inflation, therefore, leads to people particularly the poor being able to afford to buy the goods and services that they need in order for them to lead a decent life. low inflation implies that more people will have stable or improved income that may raise them above the poverty datum line and thus reduce the high incidences of poverty. financial system stability in addition to the attainment of price stability using monetary policy, the central bank ’ s other pillar is the responsibility of ensuring financial system stability. financial system stability is the prevention of disruptions to the financial sector that are likely to cause significant costs to real output. it compliments monetary policy implementation, as monetary policies are transmitted through financial institutions. if the financial system is unstable, monetary policy will not be effective. in summary, the central bank, such as ours, has a key role in the attainment of the mdgs through the implementation of appropriate monetary and supervisory policies that ensure price and financial system stability. macroeconomic analysis and modelling are key components in arriving at sound and effective macroeconomic policies which will contribute to poverty reduction through the acceleration of economic growth and facilitate the achievement of the mdgs. in a nutshell, mr chairman, one can simply state that low inflation coupled with a developed and stable financial system, will enhance higher economic growth. sustained and higher growth will create more jobs and subsequently increase people ’ s income. an increase in people ’ s