A domestic-demand-led recovery is gaining momentum, based on strengthened oil investments, low interest rates and an expansionary fiscal policy. The negative output gap is expected to reverse in 2005. The external sector should start contributing positively to growth. Core inflation is projected to rise as a result of excess demand but is expected to reach the middle of the range targeted by the Central Bank only by end-2006. Monetary policy should be geared towards reaching the inflation target by maintaining low interest rates throughout the projection period. Fiscal policy should return rapidly to the fiscal rule to help avoid overheating and Krone appreciation, and to contribute to a more equitable use of oil resources over time. ...