The recovery has gained momentum, fuelled by historically low real interest rates and the acceleration of world demand. Growth for mainland Norway is expected to rebound to around 3¾ per cent during 2004, before falling back toward trend in 2005. Unemployment is likely to decline, albeit slowly, while inflation should eventually rise in response to the weaker exchange rate and the closing of the output gap. Fiscal credibility would be improved via stricter adherence to the fiscal guidelines. The latter would be aided by the planned pension reform and by efforts to control rapidly rising expenditures for sick leave and disability. Along with reforms to strengthen competition in sheltered sectors, such steps would also enhance long-run potential growth...