Feb. 2 (Bloomberg) -- Norway faces hurdles in maintaining economic growth as a deteriorating global outlook hurts exports and rising household debt spurs imbalances in the housing market, the International Monetary Fund said.
The country’s mainland economy, which excludes oil and shipping output, will grow 2.2 percent this year, after expanding an estimated 2.6 percent in 2011, the IMF said in an Article IV report today. Unemployment will stay at 3.6 percent, the group said.
“The challenge going forward will be to continue stable growth in the face of a difficult near-term global outlook while at the same time reducing vulnerabilities arising from long-run fiscal pressures and high levels of household debt and house prices,” the Washington-based group said.
The IMF said it welcomed regulatory efforts to tighten mortgage lending to an 85 percent loan-to-value ratio, and also recommended the country raise minimum risk weights on mortgage loans at banks, in coordination with other Nordic countries.
House prices rose an annual 8.4 percent in January, according to Norway’s Real Estate Brokers Association, while consumer credit growth hovers at more than 7 percent. The central bank estimates private debt burdens will grow to more than 204 percent of disposable income this year.
Norway, the world’s seventh-largest oil exporter, has been shielded from the worst of the debt crisis as its crude revenue generates surpluses and unemployment remains close to 3 percent. The central bank in December cut its benchmark interest rate by 50 basis points to 1.75 percent to shield the economy from the fallout of Europe’s debt crisis.
The IMF also said that it supports a “broadly neutral fiscal stance in the short term,” and that current monetary policy is “appropriate.”
--Editors: Tasneem Brogger, Christian Wienberg.
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