The global economy is reflecting the effects of the war in the Middle East, greater geopolitical turbulence and unpredictable US trade policy. High energy prices are pushing up inflation among Norway’s key trading partners.
– More costly imports and high wage growth in recent years are keeping inflation at a high level this year”, says researcher Thomas von Brasch at Statistics Norway.
Projections show wage growth falling from 4.9 per cent last year to 4.0 per cent this year and down further to 3 per cent in 2029. The appreciation of the krone will pull down inflation in the years ahead, and the rate is expected to fall from 3.2 per cent this year to around 2 per cent in 2029.
No rate cuts this year
Norges Bank cut the key policy rate twice in 2025. It is now 4.0 per cent. In light of its assessments of the Norwegian and the global economy in January, Norges Bank signalled that the interest rate would probably be reduced further in the course of 2026.
– More costly imports due to the war in the Middle East and the high inflation figures in January and February are clear indicators that the rate will not be cut this year”, says Thomas von Brasch.
According to our projections, there will be a single cut of 0.25 percentage point in both 2027 and 2028, leaving the key rate at 3.5 per cent in 2029.
Flat developments in residential construction
Housing investment remained at a low level throughout 2025 after falling by around 25 per cent through 2023 and 2024. Housing investment accounts for about a fifth of overall mainland investment, and the slowdown has depressed activity in the Norwegian economy as a whole.
– Continued slow sales of new dwellings, coupled with the fact that the next interest rate cut is unlikely to come before next year, means that an upswing in housing investment is some way off”, says Thomas von Brasch.
Resale home prices increased substantially last year. As a result of clear growth in real wages and in due course a reduction in interest rates, the rise in house prices is expected to remain high in the years ahead. According to our projections, house prices will be just over 20 per cent higher in 2029 than the level in 2025.
Unemployment will fall
According to the Labour Force Survey (LFS) the unemployed accounted for 4.5 per cent of the labour force in 2025, up 0.5 percentage point on 2024. Much of last year's increase related to an increased supply of labour. Almost half of the increase was attributable to young people aged 15–24 years in education. The picture is mixed, nonetheless. Unemployment registered by the Norwegian Labour and Welfare Administration (NAV) has remained almost unchanged for more than two years. There are still many vacancies. Employment has increased steadily since the end of the Covid period, and the upswing is expected to continue in the years ahead, particularly in services. Increased demand for labour will cause unemployment to fall gradually from 4.5 per cent in 2025 to just over 4 per cent in 2029.
Norwegian economy moving at a normal pace
Wealth creation in the Norwegian economy has picked up markedly since mid-2024. According to our projections, the rate of mainland economic growth will be almost normal for the next few years, at just over 1.5 per cent. Developments are expected to be driven mainly by domestic factors, with a clear rise in household real income and increased public consumption and investment.
The war in the Middle East is pushing up inflation among our trading partners
In December last year, the oil price was at its lowest level since February 2021, at around USD 62 per barrel. To date in March the oil price has fluctuated widely, reaching over USD 100 per barrel at times. The price of oil futures as of 10 March fall to USD 75 by the end of the year. Gas futures prices have exhibited a similar trend, albeit with a slightly greater impact.
– Higher oil and gas prices make energy, transport and production more costly, which has a widespread impact on the global economy and pushes up inflation worldwide”, says researcher Roger Hammersland.
The war in the Middle East and prospects of higher energy prices have pushed up our projection for inflation in the euro area from 2.1 per cent in 2025 to 2.5 per cent this year. Inflation is then expected to abate and move down towards the European Central Bank’s target of 2 per cent.
Annual GDP growth among Norway's trading partners has averaged about 2 per cent since 2005. Our projections show growth slowing to 1.7 per cent this year before gradually rising again to around 2 per cent in 2029.
The analyses in the report are based on information as of Wednesday, 11 March 2026.
