The Asian crisis has curbed the rise in international commodity prices. However, the krone continued to depreciate in the first months of 1998, which will offset the effect of lower international prices on Norwegian consumer prices. The underlying rise in prices, excluding changes in indirect taxes and electricity prices, is estimated at 2½ per cent in 1998 and 3 per cent in 1999.

Wage growth is estimated at an average 5¼ per cent for 1998, ie a quarter percentage point higher than the estimate in the December Inflation Report. Wage growth in Norway may be somewhat higher than among trading partners in the coming years.

The estimate for the current-account surplus has been revised downwards by a substantial margin and is now projected at NOK 40 billion based on an average oil price of NOK 105 in 1998.

Unemployment has now reached the level prevailing at the beginning of 1985, and is falling rapidly. The number of registered unemployed may approach 40 000 towards the end of the year. In addition, the number of vacancies rose to 21 000 in February. Whereas there were 20 unemployed to one vacancy in 1993, this ratio has now fallen to 3.

Central Bank Governor Kjell Storvik points out that these developments confirm the scenario presented by the Bank earlier:

"Although this development is most welcome, the pace of these changes prompts the question of how long the robust growth in the Norwegian economy can continue, not least how long this can last before there is a turnaround" says Governor Kjell Storvik.

"It is still possible to smooth cyclical fluctuations, but this cannot be achieved without a tightening of economic policy. This view is fully consistent with the recent recommendations of the OECD and the IMF," states Mr. Storvik.