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Norway Mainland GDP growth is projected to slow to 1.2% in 2023. High inflation and policy tightening are weighing on domestic demand. The economy will strengthen gradually but output growth will remain moderate at 1.3% in 2024. Economic activity will benefit from a decline in energy prices. Underlying inflation will also fall, albeit sluggishly, due to the tight labour market and the recent weakening of the Norwegian currency that will feed through to inflation with a lag. Unemployment will edge up as the economy softens but remain around prepandemic levels. Monetary policy tightening is appropriate to bring inflation towards the central bank target of 2%. Fiscal support to households on account of high energy costs should be phased out, with protection of the vulnerable being provided through the social safety net. Structural reforms should focus on facilitating the green transition, encouraging higher labour force participation and fostering skills for the digital era. High inflation continues to weigh on domestic demand Mainland GDP growth slowed in the first quarter of 2023 compared to the previous quarter. High inflation and interest rate increases have continued to weigh on real incomes, consumer confidence and investment activity in the housing sector. Even so, private consumption has been supported by electricity price subsidies and the reversal of the excess household saving observed during the pandemic. Large fluctuations in car sales have also impacted economic activity. Vehicle purchases surged towards the end 2022, ahead of the announced car tax changes from 2023, and then contracted as the temporary effects dissipated, affecting consumption growth in 2023. Headline consumer price inflation peaked in October 2022, but was still 6.4% in April 2023. Nominal wages grew by 4.3% in 2022, exceeding the increase agreed in wage negotiations, with tight labour markets fuelling wage growth. Ongoing wage negotiations point to wage growth of around 5¼ per cent in 2023.
Norway
1. Core inflation is Statistics Norway's CPI-ATE measure which adjusts for tax changes and excludes energy products. 2. Hypothetical CPI calculated by Statistics Norway showing overall price growth if the government had not introduced the electricity subsidy scheme for households. Source: Statistics Norway. StatLink 2 https://stat.link/2ekd41
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023