After a period of weak growth in 2023 and 2024, value creation in the Norwegian economy has picked up appreciably so far this year, driven by household demand and an expansionary fiscal policy.

“The Norwegian economy is thriving. Household purchasing power has increased and income growth will continue for the next years. In addition, the state has gained greater purchasing power because of the enormous increase in the petroleum fund, which provides scope for a continued expansionary fiscal policy in the near term,” says Thomas von Brasch, head of research at Statistics Norway.

On balance, growth in the mainland economy the next few years is expected to exceed what we regard as normal growth in the Norwegian economy of around 1.5 per cent.

Solid growth in real wages going forward

Annualised growth in monthly basic earnings was 5.3 per cent in Q2, which is a little higher than in the three previous quarters. Wage growth was broad-based.

“Wage growth has been surprisingly high this year, and well above the norm of 4.4 per cent proposed by the wage leader segment. We have therefore revised our projection for wage growth this year up to 4.9 per cent,” says Thomas von Brasch.

Our inflation projection implies that real wage growth will be around 1.9 per cent this year. This is slightly higher than the projection that implicitly formed the basis for the wage settlement earlier this year. Real wage growth will slow gradually to just over 1 per cent in 2028. By way of comparison, real wage growth has averaged 0.3 per cent for the past ten years.

Continued expansionary fiscal policy

Public investment and consumption account for about a third of the mainland economy. This demand has grown appreciably more than the normal economic growth of 1.5 per cent through 2023 and 2024 and so far this year.

The value of the Government Pension Fund Global (the petroleum fund) has surged from around NOK 10 000 billion in 2019 to around NOK 20 000 billion in early September this year. This increase provides scope within the bounds of the fiscal rule for public consumption and investment combined to grow by about 2 per cent in the next few years. We therefore expect fiscal policy to continue to make an expansionary contribution to economic activity up to 2028.

One more interest rate cut this year

After almost two years with a relatively high key policy rate, Norges Bank reduced the interest rate to 4.25 per cent before the summer, and indicated that there will be further cuts going forward. Norges Bank sets the policy rate primarily to stabilise inflation at around 2 per cent, and to ensure financial stability. The central bank also takes into account that a higher interest rate impacts activity in the Norwegian economy. The projections in our June economic report pointed to a key rate of 3.25 per cent towards the end of 2026.

“A marked upturn in the Norwegian economy and surprisingly high wage growth mean that we only expect one further interest rate cut this year and two more next year. This will bring the key rate down to 3.5 per cent towards the end of 2026”, says Thomas von Brasch.

The annual rise in the consumer price index (CPI) was historically high in 2022 and 2023, but fell back considerably in 2024, to 3.1 per cent. Our projections show that inflation will fall further, from 3.0 per cent this year to around 2.5 per cent in 2027 and 2028. As inflation is higher than the target, partly due to continued high wage growth and a slightly weaker krone, we expect the key rate to be kept at 3.5 per cent through 2027 and 2028.

Unemployment peaking this year

Unemployment as measured by the Labour Force Survey (LFS) rose from a low level of 3.2 per cent in 2022 to around 4.0 per cent at the beginning of 2025. However, unemployment has increased markedly this year. According to the LFS trend figure, unemployment was 4.6 per cent in July.

“It may seem paradoxical that unemployment is rising during an economic upturn. The increase is not attributable to lower demand for labour, but to more people entering the labour market,” says Thomas von Brasch.

Employment has risen steadily since the end of the Covid period, and the rise has been somewhat stronger so far this year than in the same period last year. A continued rise in participation is expected to lead to unemployment peaking this year and falling as an annual average, from 4.5 per cent in 2025 down to 4 per cent in 2027.

Moderate growth in the global economy

The global economy is shrouded in uncertainty, partly as a result of changes in American trade policy, a loss of faith in US institutions and growing geopolitical turbulence.

“We are now assuming that protectionist currents – associated in particular with US trade policy – will curb globalisation. This may weaken access to markets for small, open economies like Norway in particular,” says Roger Hammersland, researcher at Statistics Norway.

GDP growth among Norway's trading partners has averaged about 2 per cent annually since 2005. Our projections indicate that growth will remain a little lower than this in the years up to 2028.

The analyses in the report are based on information as of Wednesday, 10 September 2025.