The global economy grew by just over 3 per cent last year, almost ½ percentage point less than we predicted at the beginning of the year. Growth in the USA, the Eurozone, India and Russia, among others, was disappointing. Meanwhile, economic growth in countries like the UK and Japan exceeded our expectations. The disappointments are mostly history. In the second half of last year, growth in both the industrial and emerging economies rose to 2 and just over 5 per cent, respectively, which we believe to be “cruising speed”. 

We expect the growth rate to be about the same this year. On the one hand, it is natural to expect a broader increase in private consumption in the industrial countries. On the other hand, high debt, budget cuts and excess capacity will continue to dampen growth in these countries. In the EMEs, lower growth in China is being offset by a slight upturn in the other BRIC countries. The US Federal Reserve has started easing up on the gas pedal, but neither the Fed nor other central banks in the West plan any rate hikes till next year at the earliest. This means that long-term interest rates will also remain at the current low levels for the rest of the year.

The Norwegian economy cooled down last year. We expect growth to be under par for the next three years as the ripple effects from the oil sector turn from strongly positive to slightly negative. Higher growth in exports and an expansive fiscal policy will help limit the downturn. Unemployment is expected to continue rising until the end of 2015, and cost growth will not be high enough to keep inflation on target for the next three years either. The housing market has cooled down considerably in the last half year and we expect housing prices to keep on declining until the end of next year.  In other words, Norges Bank has good reason to put off any rate hikes till the autumn of 2015.

The growth in the Baltic economies slowed down in 2013 due to adverse external environment. However private consumption growth has accelerated and supports the economic development. It is clear that the domestic demand recovery is not sufficient to offset the losses incurred in the export markets. A combination of strong growth in exports and supportive expansion of the domestic market is needed for a sustainable recovery. Gradually improving external demand will contribute to lift growth to the range of 3–5 per cent in 2014-2015.

Please see the whole report for details.