Growth in the Norwegian economy, which was curbed by high inflation and subsequent interest rate rises throughout 2023 and 2024, has picked up this year, partly as a result of strong growth in household consumption. 

“We expect the growth to continue in the coming years. This expectation stems from lower interest rates, continuing high wage growth, a stronger focus on defence and a turning point in housing construction,” says Statistics Norway’s head of research, Thomas von Brasch. 

Since the publication of the previous economic trends report in March, the outlook for economic activity in many of our trading partners has deteriorated. 

“Increased trade conflicts and an unpredictable US policy are putting the brakes on economic activity, including here in Norway. After a brief interlude in 2026, the Norwegian economy will return to a more normal situation in 2027,” says Thomas von Brasch. 

Growth in the Norwegian economy continuing 

In addition to increased international trade barriers and greater uncertainty generally, growth prospects on the mainland next year are also diminishing. This is a result of the downturn in petroleum investments. However, other domestic factors will help to sustain growth. 

“Household consumption accounts for around half of mainland GDP. Continuing strong profitability in the wage-leading tradable sector is sustaining wage and income growth, which when combined with a lower key policy rate will boost consumption in the coming years,” says Thomas von Brasch. 

Provisional figures from the national accounts indicate that housing investments fell by almost 20 per cent in both 2023 and 2024. We have not seen such a marked fall since the housing crisis of the 1990s. Housing investments account for around a fifth of the total investments on mainland Norway. 

“We do not expect to see housing investments start to pick up again until the end of the year. This turning point must be viewed in context with an expected fall in interest rates and the marked increase in new house sales since 2024,” says Thomas von Brasch. 

Continuing growth in household consumption, the turning point in housing investments and a stronger focus on defence are boosting economic activity in Norway. Growth in mainland GDP will rise from 0.6 per cent in 2024 to around 1.5 per cent this year and next year, before increasing further to around 2 per cent from 2027 onwards. 

Real wage growth remains high 

On 31 March, the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO) agreed on a framework for annual wage growth of 4​.4 per cent in the industrial sector under the NHO umbrella in 2025. According to provisional figures from the national accounts, the labour cost share, which is the percentage of total economic output that accrues to labour, is estimated to be around 72 percent for the industrial sector in 2024. This figure is much lower than the average of around 80 percent during the period 2010–2024. 

“Profitability in the industrial sector indicates that wage growth will remain strong in the coming years, although it is expected to decline somewhat from last year’s high level,” says Thomas von Brasch. 

Nominal annual wage growth is expected to fall from 5.6 per cent last year to 4.4 percent this year, and then decline further to around 3.5 per cent in 2028. Real wage growth is expected to remain high, but will decrease slightly from last year’s abnormally high level of 2.4 per cent, towards 1 per cent in 2028. 

Interest rate cut in the autumn 

Price growth, measured by the consumer price index (CPI), reached historically high levels in 2022 and 2023, but fell sharply in 2024. Annual growth in the CPI ended 2024 at 3.1 per cent, corresponding to a decline of 2.4 percentage points compared with the previous year. In May, the 12-month growth in the CPI was 3.0 per cent. The 12-month growth in underlying inflation, as measured by CPI-ATE, fell from 3.4 per cent in March, to 3.0 percent in April and then 2.8 percent in May. 

Although price growth has declined since the peak in 2022, it is expected to remain above the inflation target over the coming years. This is due, among other things, to the persistent after-effects of the Norwegian krone depreciation since 2023, which has contributed to significant nominal wage growth. 

According to the forecasts, inflation measured by the CPI will fall from 2.8 per cent as an annual average this year, to around 2.5 per cent in 2028.  

Norges Bank sets the key policy rate primarily in order to stabilise inflation at around 2 per cent, and to ensure financial stability. The central bank also takes into account the fact that a higher interest rate affects economic activity in Norway. Unemployment, measured by the Labour Force Survey (LFS), has risen from a low level of 3.2 per cent in 2022 to over 4.0 per cent so far in 2025. 

“We expect two interest rate cuts this year, and three next year. Higher unemployment, lower underlying price rises, in addition to reduced demand and lower interest rates internationally, are making lower interest rates here in Norway more likely,” says Thomas von Brasch. 

Since December 2023, the key policy rate has been 4.5 per cent, which is the highest level since December 2008. The estimates indicate that the key policy rate will fall to 3.25 per cent by the end of 2026. 

Downturn in the international economy 

The economic prospects for many of Norway's trading partners have weakened in recent months as a result of increased trade conflicts. 

“Increased uncertainty over US economic policy has contributed to weaker growth prospects and greater fluctuations in financial markets. Economic development in the USA has also been more sluggish than expected, and the forecasts for the eurozone and many Asian economies have been downgraded,” says Statistics Norway researcher Roger Hammersland. 

On average, GDP growth among Norway’s trading partners has remained static at around 2 per cent per year since 2005. The forecasts suggest that growth will drop below 1.5 per cent this year and next year, before gradually recovering to near 2 per cent in 2028. 

The analyses in the report are based on information as of Wednesday, 11 June 2025.