The Norwegian economy is in a “moderate slowdown” and interest rates have peaked and are likely to fall next year, Statistics Norway said on Thursday in its quarterly economic forecast.

“Lower growth in household demand and investments in mainland Norway has contributed to weak growth in the mainland economy in the first half of 2008, marking the end of almost five years of strong economic growth,” Statistics Norway said.

The state statistics agency bumped up its forecast for mainland gross domestic product growth this year to 3.1 percent from a previous projection of 2.9 percent but trimmed its 2009 mainland GDP growth view to 1.7 from 1.9 percent.

The agency also raised its forecast for core consumer price inflation this year to 2.6 percent from 2.5 and its 2009 prediction to 2.5 percent from 2.3.

“The growth in the Norwegian economy has decreased substantially. However, unemployment remains stable and the rate of inflation has increased,” the body said in a statement.

Weaker international growth, lower commodity prices and a stronger Norwegian currency were likely to contribute to continued low growth, slightly higher unemployment and lower inflation, it said.

“We reckon that the interest rate peak has been reached in Norway,” Statistics Norway economist Torbjoern Eika told a news conference.

“We therefore expect lower interest rates in 2009,” the statistics agency said.

Source: http://www.afxnews.com

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