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‘One in three’ Norwegian homes worse off than at start of 2022

The proportion of households in Norway that are struggling to make ends meet is increasing, according to new analysis.

Published: 30 July 2022 12:05 CEST

'One in three' Norwegian homes worse off than at start of 2022

An increasing number of Norwegian households are struggling with living costs. Photo by Jonas Leupe on Unsplash

In a new report, analysis institute Consumption Research Norway (SIFO) at Oslo Metropolitan University concludes that one in three homes in Norway have worse finances now than they did in January this year.

The ability to pay bills, interests and loan repayments are meanwhile cited as a problem for one in four of all households.

“We are in an expensive time, which has been building up since August last year and got stronger during the winter. We are now talking about higher prices for energy, fuel, food and higher interest,” researcher Christian Poppe told broadcaster NRK.

“The sum of this has impacts unequally and some people are hit extra hard,” he said.

Two thirds of people who spoke to researchers for the report said that they had been forced to rein in spending due to higher living costs.

Cutbacks reported include reduced use of electricity, less car use and less social activity.

21 percent said that they had reduced their food budget to make ends meet, a number that increases to 60 percent amongst those who said they had been hardest-hit.

“There are isolated warning signs in this report and the proportion of people saying they have to save on their food budget is high,” Poppe told NRK.

“There is a limit to how little you can spend on food and in some cases people already don’t have enough money for food,” he said.

Researchers spoke to a representative selection of Norway’s 2.1 million households to produce the report, which shows a significant increase in economic stress at homes compared to a similar study from July 2021.

66 percent said they are finding it difficult to pay energy bills, with those in the south of Norway more severely affected than those in the north.

Energy prices in southern Norway have been up to 131 times higher than those in the south in recent weeks, according to Nordpool figures.

The consumer price index, a measure of the cost to households of everyday goods, has increased by 6.3 percent since last summer, NRK writes.

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'Turning point': What the future holds for Norway's economy

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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