The level of wage costs is projected to edge up in the period ahead. Wage growth is estimated at 3¾ per cent in 2000, 4 per cent in 2001 and 4½ per cent in 2002. The estimates for 2001 and 2002 have been revised up compared with the December report.

Norges Bank projects an increase in mainland GDP of 1½ per cent this year and 2 per cent in 2001. The estimates have been revised up by ¾ percentage point for 2000 and ½ percentage point for 2001 compared with the December Inflation Report. In 2002, growth is expected to be broadly in line with trend growth of 2¼ per cent.

The upward revision of the projections in this Inflation Report partly reflects signs of a more robust world economy. Growth in the global economy has picked up faster than expected following the crises in Asia and Russia in 1997-1998. This has improved the outlook for Norwegian exports and for prices for Norwegian goods. The turnaround in manufacturing industry therefore seems to be less pronounced. There are also signs of higher household demand. After some uncertainty and a high level of saving last year, households are now as optimistic about the economic outlook as they were in the first half of 1998. House prices have continued to rise, and growth in household borrowing has picked up. Retail sales have also shown an increase. This suggests a sharper decline in household saving and higher growth in private consumption in 2000 than projected earlier.

There are still strong pressures in the Norwegian economy. The risk of a downturn within the next two years now appears to be limited.