Citigroup warns Norway against tapping oil fund

Richard Orange
Richard Orange - [email protected] • 26 Aug, 2013 Updated Mon 26 Aug 2013 14:19 CEST
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Global banking giant Citigroup has warned that Progress Party proposals to spend money from Norway's oil fund on infrastructure could seriously damage the country's international competitiveness.

 
"It will certainly contribute to a strengthening of the krone if it is decided that more of the oil money is spent or invested in Norway," Josh O'Byrne, a currency strategist at Citigroup's London office, told the DN business newspaper.  "It will lead to more sensitivity to the oil sector, and probably greater inflation pressure nationally." 
 
O'Byrne was talking to the paper after he released a currency report that was highly critical of the Progress Party proposal. 
 
"A significant increase in financial stimulus, despite the limited spare capacity in the economy, could worsen Norges Bank's headaches, further weakening the competitiveness of the country, and potentially fuelling further rise in house prices," he wrote. 
 
Ketil Solvik-Olsen, the Progress Party deputy leader who is spear-heading plans to spend more of Norway's oil revenues, said that Norway would not suffer the 'Dutch disease' which afflicts big natural resource exporters if it limited spending to infrastructure. 
 
"If you spend money on roads or perhaps building a new hospital, you are pushing forward investments that are extremely profitable for society," he told The Local. 
 
"That’s where the Dutch went wrong: they spent too much money on welfare and decreased the competitiveness of their industry." 
 

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Richard Orange 2013/08/26 14:19

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