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ECONOMY

‘Turning point’: What the future holds for Norway’s economy

The standstill in Norway's economy may soon be at an end, according to a new report from Norway's national data agency. The agency isn't alone in its optimistic outlook, as the country's PM has said the country is at a 'turning point'.

Published: 14 June 2024 11:19 CEST
Pictured is Norway's PM Jonas Gahr Støre.
Norway's PM has said the economy is at a turning point. Pictured is Norway's PM Jonas Gahr Støre. Photo by Photo by Ludovic Marin/ AFP

Norway’s economy should begin to pick up in the coming months and years after a period of stagnation, according to a national data agency, Statistics Norway, in a forecast on the Norwegian economy.

“With lower interest rates and clear wage growth, household consumption will increase. Economic activity will also pick up as a result of increased public consumption and an increase in housing investment,” said Thomas von Brasch, head of research at Statistics Norway.

The stagnation would likely continue for the rest of 2024 before picking up in 2025 and returning to a more neutral position in 2026.

“The standstill in the Norwegian economy is soon over,” von Brasch said.

After a period of high inflation, peaking at 7.5 percent in October 2022, price rises have begun to moderate. During this period, inflation in Norway was at its highest level since the 1980s.

This is good news for those hoping for lower interest rates, as the central bank had raised rates rapidly to try and control inflation and get it towards a target of two percent.

“Lower inflation at our trading partners will cause inflation here at home to continue to fall. Reduced interest rates internationally also contribute to the policy rate being gradually cut in Norway,” von Brasch said.

After the latest inflation figures for Norway were released, many economists predicted that the first cut would arrive around December. Between May 2023 and May 2024, inflation was measured at 3 percent.

READ ALSO: What Norway’s latest inflation figures mean for your finances

Market rates, the interest rates consumers pay, are expected to fall from around 4.7 percent this year, to 4 percent next year, and 3.5 percent the year after.

Norway’s PM, Jonas Gahr Støre, said the Norwegian economy was at a “turning point”, with the future looking much more positive for those in Norway.

“It is good news for people’s finances and clearly confirms that we are at a turning point in the economy where people can get better advice. Statistics Norway estimates that price growth will continue downward, so interest rates can eventually be lowered. They also expect increased purchasing power for people this year and in the following years. The government aims for people to get better advice,” PM Jonas Gahr Støre told Norwegian newswire NTB.

One factor that had the researchers at Statistics Norway more uncertain was the development of the Norwegian krone.

“The development in the krone exchange rate is important for inflation, among other things through import prices measured in Norwegian kroner. There is great uncertainty surrounding exchange rate movements,” the report read.

However, it added that keeping exchange rates the same in the coming years could be considered a positive development. This may disappoint those who have been negatively affected by a weakened krone.

Still, there was much better news when it comes to wages. Over the past eight years wages have barely grown in real terms, meaning price increases have outpaced wages. Workers in Norway can look forward to real wage increases of around 1.5 percent until 2027.

Unemployment would rise slightly in the coming years, though, from 4 percent currently to 4.2 percent in 2025.

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MONEY

How Norway has become cheaper for tourists

The recent drop in Norway's price level has made it a more appealing destination for tourists looking to visit Scandinavia without breaking the bank.

Published: 21 June 2024 17:38 CEST
How Norway has become cheaper for tourists

Norway has long held a reputation for being one of the most expensive countries in Europe.

From sky-high prices for everyday items like groceries and dining out to costly accommodation and transportation, Norwegian prices often raise eyebrows among visitors and newcomers.

READ MORE: What will be cheaper and more expensive in Norway in 2024? 

The perception of Norway being unbelievably pricey is not unfounded; historically, its price levels have consistently ranked well above the European average.

Recent figures, however, indicate a potential shift in this dynamic.

The latest EU price statistics

In 2023, Norway’s price level was 25 percent higher than the average in EU countries, according to preliminary figures from the European purchasing power survey.

This marks a significant decrease from the previous year, when Norwegian prices were 43 percent above EU prices, as reported by Statistics Norway (SSB).

This decrease in price levels has implications for tourism.

As the cost differential shrinks, Norway becomes a more attractive destination for foreign visitors who may have previously been deterred by the high prices.

“The decrease in the price level in Norway compared to the rest of Europe has made it significantly more attractive for foreign tourists to holiday here with us.

“In return, it has become more expensive than before for Norwegians to holiday abroad,” Espen Kristiansen, a section manager at the SSB, said, according to the business newspaper e24.

Comparison with neighbouring countries

It must be noted that hotel and restaurant prices, which tend to be higher in Norway than in many European countries, still contribute to Norway’s overall high price level.

For these services, prices were still 43 percent higher than the EU average in 2023.

Comparatively, neighbouring Sweden’s prices were 14 percent higher than the EU average, down from 22 percent in 2022.

READ MORE: Five reasons why 2024 will be a good time to visit Norway

Denmark’s relative price level remained consistent, at 43 percent above the EU average, largely because the Danish krone is tied to the euro, unlike the Norwegian and Swedish currencies.

“Part of the explanation for the different developments in price levels in the Nordic countries is that the Danish krone follows the euro, unlike the Norwegian and Swedish ones,” Kristiansen said.

The most expensive country last year was Switzerland, with prices 74 percent above the EU average, according to the preliminary findings of the European purchasing power survey.

How a (relatively) weak krone also favours tourists visiting Norway

When travelling to Norway, tourists can still benefit from a favourable exchange rate (despite the currency’s recent uptick) even after taking inflation into account.

The weaker krone means visitors get more value for their money when exchanging foreign currency for Norwegian kroner.

READ MORE: How the weak Norwegian krone will affect travel to and from Norway

For instance, if a hotel room in Bergen costs 1,000 kroner per night, it would be around 88 euros at the current exchange rate. Three years ago, the same room would have cost approximately 100 euros.

Another example is dining out. A meal priced at 250 kroner (a main consisting of grilled salmon steak with vegetables, for example) is equivalent to 22 euros today, compared to 25 euros three years ago.

If you want a better understanding of how much cheaper a trip to Norway has become over time, you can use historical currency calculators to get a more exact estimate.

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