UPDATE 2-Norwegian companies slash growth outlooks ahead of central bank meeting

(Adds analyst, inflation, currency)

OSLO, March 10 (Reuters) - Norwegian companies saw a rapid slowdown in business activity due to the coronavirus outbreak even before oil prices plummeted on March 9, and over a third slashed their growth outlooks, a central bank business survey showed on Tuesday.

The lower price of crude -- Norway’s main export -- and the virus outbreak have led many forecasters to predict that Norges Bank will slash the cost of borrowing on March 19 in a bid to stave off recession.

The quarterly business survey was conducted from Jan. 27 to Feb. 14, and subsequently updated between March 4-6 to capture the impact from the virus.

“The outbreak and the measures to contain it appear to have consequences for large segments of the business sector ... Over a third of enterprises participating in the phone survey have revised down their growth outlook in recent weeks,” Norges Bank said.

“There is considerable uncertainty regarding the duration of the outbreak, and a number of contacts have implemented temporary hiring freezes,” it added.

The original survey which concluded in mid-February showed the economy was on a downward trend even before Norway’s first case of coronavirus was detected on Feb. 26 and Monday’s oil price crash.

“Given that growth momentum was already weak, we see a clear risk that a recession will start in the second quarter. Norges Bank must take action and has no choice but to slash its key policy rate,” Handelsbanken wrote in a note to clients.

The interest rate will likely by cut by 50 basis points, from 1.5% to 1.0%, with the possibility for further easing, Handelsbanken added.

Prime Minister Erna Solberg and Finance Minister Jan Tore Sanner will hold a joint news conference later on Tuesday to outline the government’s initial fiscal response.

Among policy proposals will be a deferral of wealth tax payments, financial daily DN reported, citing unnamed sources.

The prime minister’s office was not immediately available for comment.

While lower oil prices will reduce the government’s income, Norway can draw on its $1 trillion sovereign wealth fund, the world’s largest and the assets of which correspond to around seven years of fiscal spending.

A separate report on Tuesday showed February core consumer price inflation eased to 2.1% year-on-year, down from 2.9% in January and lagging a forecast of 2.4% in a Reuters poll.

Norway’s crown currency strengthened 1.8% against the euro, trading at 10.77 at 1038 GMT after falling more than 5% to record lows on Monday. (Editing by Raissa Kasolowsky, Kirsten Donovan)