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Inflation is on the way down, and interest rates are set to peak soon. However, households’ real disposable income has weakened, and it appears that next year the interest burden will reach its highest level since the 1990s.
The unusually weak krone lately means that it will be some time before the target inflation rate is reached. The consequence is likely to be another year of real wage decline and two more interest rate hikes.
Growth in economic activity will be slightly lower, unemployment is likely to increase and inflation will see a rapid decline in 2023.
The Norwegian economy is characterised by low unemployment, high consumer price growth, falling house prices and rising interest rates. In the short term, a moderate decline in the economy is expected, but mainland GDP is nevertheless expected to remain cyclically neutral in the next few years.
Widespread price growth, increased interest rates and weaker growth prospects internationally will lead to an economic downturn in Norway in the next few years. However, the key policy rate will rise by a further 1 percentage point this year in an attempt to curb the high inflation.
Norway is heading towards an economic boom. Meanwhile, inflation is at a record high. A rapid rise in interest rates can therefore be expected in the period ahead. Combined with reduced prospects globally, this will slow economic growth in Norway.
The Norwegian economy is starting to return to a normal level of activity following the further reopening of society. However, the war in Ukraine is significantly curbing the growth outlook for our trading partners in Europe, which in turn is having a negative impact on the Norwegian economy.
Mainland GDP has experienced substantial growth in recent months, and the economy is now approaching what we consider to be a normal level. Although the Omicron variant is creating uncertainty about further developments, we assume that its negative effect on the economy will be limited and temporary.
The reopening of society is well underway, and the upswing in the Norwegian economy continues. The COVID-19 pandemic will nevertheless continue to impact on the economy for a long time to come. The key policy rate is expected to increase gradually to 1.75 per cent in 2024.
The vaccination of the population is progressing well, and the reopening of society will give a significant boost to economic activity in Norway. The first interest rate hike will most likely be in September.