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ECONOMY

Fact check: Is Norway really better off than Sweden right now?

Norway’s finance minister said Wednesday that consumers in Norway had enjoyed better economic conditions than their Swedish counterparts. So, does this claim hold up?

Published: 5 June 2024 15:58 CEST
Pictured is the Norwegian and Swedish flag side by side.
Norway's finance minister has said that consumers have enjoyed a much smoother economy in Norway than in Sweden. Photo: AFP/Joe Klamar.

Ahead of a meeting of the Nordic countries’ finance ministers on Wednesday, Norway’s finance minister, Trygve Slagsvold Vedum, said that things had been easier for Norwegians than for Swedes when it came to the economy.

“Since the last finance minister’s meeting last year, we have had a difficult time in Norway, but in Sweden it has really been rough. There, purchasing power has fallen much more than here, and unemployment is much higher,” the finance minister told the Norwegian newswire NTB.

Vedum’s interview was intended to rally optimism in Norway. He pointed to factors such as an expected real wage increase, cuts to childcare costs, and a bump to pensions and student loans as cause for optimism.

Does Vedum’s claim hold up?

Consumers’ confidence in the Norwegian economy has been low over the last few years, and market research company Opinion’s most recent survey showed there were still more people who viewed their personal finances and the economy negatively than positively.

Norway’s consumer price index (CPI), a measure of inflation, rose by 3.6 percent between April 2023 and April 2024, according to the latest figures from the national data agency Statistics Norway.

The figures for April marked the fourth consecutive month in which inflation slowed in Norway.

Inflation in Norway is also considerably lower than the peak of 7.5 percent between October 2022 and October 2021.

Prices in Sweden, meanwhile, were up 3.9 percent between April 2023 and the same month this year, figures from the Swedish data agency Statistics Sweden show. Inflation in Sweden has moderated significantly since the peak of 12.3 percent in December 2022.

Year-on-year inflation was measured at more than 10 percent for eight consecutive months between September 2022 and April 2023, but has slowed every month since January.

When it comes to work, Sweden has a higher unemployment rate than Norway. The latest figures from Sweden’s data agency show an unemployment rate of 8.9 percent. In Norway, some 4 percent of the workforce was unemployed as of April 2024.

After years of stagnant real wages (where salaries outpace inflation), workers in Norway are expected to see some positive progress. Wages are expected to rise by 5.2 percent, while inflation will be around 3.9 percent for 2024.

Earlier this year, economists at Swedbank estimated that wages in Sweden would increase by 3.7 percent in 2024. Furthermore, with the help of Statistics Sweden, the economists estimated that workers would have an average monthly salary increase of 1,300 Swedish kronor after tax cuts and inflation are accounted for. The Swedish krona and Norwegian krone are currently worth roughly the same.

Still, salaries in Sweden are, on average, lower than in Norway. At the time of writing, the most up-to-date average salary across all professions in Sweden was listed as 38,300 Swedish kronor per month.

The average salary in Norway was much higher, at 53,670 kroner per month. However, these figures are more recent (May 2024), so they will naturally be higher than Sweden’s, which are from June 2023. Additionally, Sweden generally has a lower cost of living than Norway.

READ ALSO: Do foreigners in Norway get paid less than Norwegians?

One area where Sweden’s figures are more promising than Norway’s is the key policy rate. In Sweden, the key policy rate is currently 3.75 percent, compared to 4.5 percent in Norway. Norway’s key rate isn’t expected to be cut until December 2024 at the earliest, either.

Another area where Sweden has outpaced Norway has been the strength of the Swedish krona against the Norwegian krone.

As previously mentioned, both currencies currently have roughly similar values. While the krone and the krona have struggled against other major currencies, the Swedish krona has traded for more than one Norwegian krone over the past year. In contrast, one Norwegian krone has typically been worth more than one Swedish krona in the past.

Furthermore, while Norway’s economy was performing roughly as expected, Sweden’s saw unexpected growth in the first quarter. 

READ MORE: How healthy is the Swedish economy right now?

Has the smoother economy brought Norway happiness?

The extra money in Norway isn’t everything, at least according to the annual World Happiness Report (WHR) by The UN Sustainable Development Network.

Norway was ranked the least happy of the Nordics but was still ranked seventh. Things were rosier in Sweden, however, with the country coming three places ahead of its neighbour at fourth.

However, the two countries had a separate happiness confidence rating. This is the confidence in the accuracy of the numbers. These figures placed a 95 percent confidence in Norway being between the 4th and 7th happiest country in the world.

This means that Norway’s happiness would be interchangeable or comparable with Sweden, which also had a 95 percent confidence ranking of 4th to 7th.

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ECONOMY

Why Norway is now unlikely to cut interest rates before 2025

In a change from earlier plans, Norway's central bank announced Thursday that it was unlikely to cut interest rates before 2025.

Published: 20 June 2024 12:30 CEST
Why Norway is now unlikely to cut interest rates before 2025

The current key policy rate of 4.5 percent will likely remain unchanged for the rest of the year, Norges Bank announced on Thursday.

“If things go as we now believe, the key interest rate will remain at 4.5 percent for the rest of the year, before it is gradually reduced,” Ida Wolden Bache, governor of the central bank, said.

The key policy rate was last raised at the end of last year and was the 14th interest rate increase since the autumn of 2021.

When the central bank last presented its forecast and expectations for the key policy rates in March, it said it would lower rates during the second half of the year – most likely in September.

Therefore, consumers in Norway can no longer expect their loan or mortgage repayments to become cheaper in 2024. In recent months, many economists had predicted the central bank would delay implementing cuts until the end of 2024.

One of Norway’s largest banks, DNB, and the country’s national data agency, Statistics Norway, forecast interest rate cuts to arrive in December.

The bank had been using cuts to prevent the economy from overheating and curb inflation. While inflation has fallen slightly below expectations, factors like high wage growth and a stronger-than-expected economy have influenced the bank’s decision.

“The committee’s assessment is that the interest rate is high enough to bring price growth down to the target within a reasonable time, but that there will be a need to keep the interest rate up somewhat longer than previously estimated,” the bank said in its explanation.

Chief economist at Sparebank 1 Gruppen, Elisabeth Holvik, told the Norwegian newswire NTB that the bank had also held off cutting interest rates to prevent the Norwegian krone from weakening any further.

Wolden Bache said that the weak krone had contributed to inflation.

“The devaluation of the krone that we have behind us still contributes to keeping price growth up,” she said.

The central bank’s governor also kept the door open to an interest rate increase if required.

Kyrre Knudsen, chief economist at Sparebank 1 SR-Bank, told NRK that the positive is that once the bank implements cuts, interest cuts will be made up to 2027.

“There were probably some who had feared that there could be talk of a somewhat higher interest rate. It is positive news that they are signalling a good number of interest rate cuts, both next year and up to 2027,” he said.

He also said that a stronger krone exchange rate could bring cuts forward.

“If the krone exchange rate strengthens a lot in the future, Norges Bank will also be able to come up with earlier interest rate cuts than what they are currently envisioning,” he said.

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