. lower interest rates will normally result in higher inflation, partly because the krone depreciates, and partly because of a rise in demand. enterprises will thus be able to increase their earnings. business sector activity is stimulated most effectively by low interest rates and a weak krone. due to the past few years ’ wage settlements, households have strengthened their financial position at the expense of private and public enterprises. house prices have edged up after stagnating earlier this year. household borrowing has moderated somewhat, but is still high. against this background, growth in private consumption is expected to be fairly high in the period ahead. consumer spending on goods is rising, pointing towards growth in private consumption this year on a par with our projections in the june inflation report. mainland gdp is projected to rise less than trend growth this year and to reach trend levels in 2004. in 2005, gdp growth is projected to be higher than trend growth. investment activity in mainland norway is low. investment in the petroleum sector is rising, but a large share of the increase in demand is being met by imports. public consumption increased sharply in 2002, but there will be little stimulus to the economy from the public sector this year. growth will mainly be fuelled by private projection in inflation report 2 / 03 based on assumptions concerning forward rates and a gradually declining krone exchange rate. consumption in the second half of this year and into 2004. we expect that investment in mainland enterprises will gradually pick up from a low level. in order to set an appropriate interest rate, it is important to be be able to form a reasonably accurate picture of the economic situation. economic statistics are the most important source of information, but they are published with a lag and some of the figures are revised frequently. in autumn 2002, norges bank established a regional network as a tool to gauge the level of activity in the norwegian economy. the network consists of companies, organisations and municipalities throughout norway. in the two rounds of talks in connection with inflation report 2 / 03, 450 contacts were interviewed. we will be having six rounds of talks each year with business and community leaders concerning financial developments in their enterprises and industries, with about 200 visits in each round. the selection of contacts represents the production side of the economy, both industry - wise and geographically. in the course of 2003, the number of contacts in the network will rise to about 1000 persons, who will be contacted once or twice a year. the department of economics at the norwegian university

svein gjedrem : norwegian monetary policy speech by mr svein gjedrem, governor of the norges bank, held in copenhagen on 17 november 2000. * * * introduction i am happy to have this opportunity to speak to you here in copenhagen about trends in the norwegian economy and about norwegian monetary policy. norway ’ s choice of monetary policy regime is closely linked to the structure of the norwegian economy. norway is a welfare society with a large public sector, a high level of transfers to households and enterprises and high direct and indirect taxes. our economy is also characterised by the great significance of petroleum activities. we have a growing aquaculture industry, and our manufacturing is also partly resource - based. the engineering industry - which is substantial - is partly based on petroleum activities. the exposed sector of the mainland economy has been fragile and vulnerable. a key concern in economic policy since the 1970s has been to avoid undermining the exposed sector too much, in view of our desire to avoid becoming too dependent on petroleum revenues. in this address i will discuss the relationship between the special structure of the norwegian economy and norwegian monetary policy. i will attempt to shed some light on certain differences between the norwegian and danish economies, and how these differences have influenced the formulation of monetary policy. background oil production started in the early 1970s and has gradually increased. forecasts show that production will peak in 2002, and thereafter decrease gradually. gas production is expected to continue to increase in the years ahead, and will account for a growing proportion of total petroleum production. the long - term forecasts for oil and gas extraction are highly uncertain, and future price movements for oil, market opportunities for gas and production and extraction costs in the petroleum sector are shrouded in uncertainty. the revenues from the petroleum sector are of great significance to the norwegian economy as a whole, and to the public sector in particular. in the 1990s, the export value of oil accounted for roughly one third of total exports excluding ships and oil rigs. government revenues from petroleum activities are currently extremely high, due to high oil prices coupled with high production volumes. current projections indicate that petroleum revenues will peak in 2002, and thereafter decline in pace with the production volume and lower oil prices. government revenues from petroleum activities have contributed to substantial government budget surpluses in recent years. as can be seen from the chart, considerable surpluses are also expected in the next few years. the amount of petroleum revenues used to finance public expenditure varies from one year to the