(Adds analysts, details, quotes)
By Terje Solsvik and Wojciech Moskwa
OSLO, Nov 26 (Reuters) - Norway's government will prepare a fiscal stimulus package to combat unemployment and shore up its construction industry, while allowing for lower interest rates to foster economic development, it said on Wednesday.
Norway's $315 billion oil-backed economy has fared better than many in the global crisis, although growth slowed to 0.1 percent in the third quarter and unemployment is slowly rising.
"The purpose of the fiscal package is to dampen the effects in Norway of the international financial crisis; the measures will be targeted towards fighting unemployment," Finance Minister Kristin Halvorsen told journalists.
"We will prioritise temporary measures that can be reversed when the economic situation has normalised," she said, adding that the construction industry would be helped.
The size of the package, which is expected to be presented in January or February of next year, was not set yet, she said.
The fiscal crisis has triggered a global economic downturn, sending oil prices tumbling by nearly $100 per barrel from their August peak. The petroleum sector accounts for nearly a third of Norwegian tax revenues and half of its exports.
Norway's government, facing a tough right-wing challenge in next year's general election, has already provided a 350 billion Norwegian crown ($50.29 billion) banking liquidity package.
Unions and lobbyists have urged more spending, with a construction group seeking 20-30 billion crowns in relief after a sharp fall in investment due to lower real estate prices.
"We may see something at least 10 billion crowns in size if it's going to have a quick effect on the construction sector," said Frank Jullum, an economist at Fokus Bank.
Such a stimulus would amount to roughly 0.7 percent of non-oil gross domestic product, a measure which strips out much of Norway's offshore oil and gas industry and shipping sectors.
RATE CUTS NOT TAX CUTS
Halvorsen said the package would not include tax cuts, even though Norway runs a huge fiscal surplus counting its oil revenues, which are invested in an offshore fund.
Jullum said targeting the construction industry through public projects was a quick way to keep employment levels high, adding however that the manufacturing and services sectors may also require more complex, tax-based relief packages next year.
"Manufacturing is affected by global growth but at the same time the sector benefits from the weaker crown," he said about the Norwegian currency, which lost 16 percent of its value against the dollar during the third quarter.
Norway's main business lobby, the Confederation of Norwegian Enterprise (NHO), said it expects non-oil GDP to shrink by half a percent next year, with a recession in the first half of 2009.
Latest figures showed Norway's quarterly non-oil growth at 0.1 percent in the third quarter and 0.5 percent in the second quarter. Overall annual growth has slowed to 0.6 percent.
Still low by international standards, Norway's unemployment rate stood at an average of 2.5 percent in the last three months, according to Labour Force Survey data released on Wednesday.
Norway's central bank slashed its main interest rate by 100 basis points last month to 4.75 percent and analysts -- along with Halvorsen -- expect the independent Norges Bank to reduce borrowing costs further.
"The weaker the economic development becomes, the lower rates will be," she told Reuters. "The way it looks now, we will have lower rates (next year)."
"The budget measures will support monetary policy, so that lower interest rates can stimulate the economy," the finance ministry said in a statement.
Halvorsen said next year's economic growth would likely fall short of the 2.3 percent target envisaged in the budget and the government would publish new economic forecasts in early 2009.
The Norwegian crown strengthened about 1 percent against the euro on Wednesday to 9.0075 at 1241 GMT, boosted in part by the government's fiscal stimulus plans. (With reporting by John Acher, Aasa Christine Stoltz, Richard Solem and Ole Petter Skonnord, Editing by Stephen Nisbet)