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MONEY

Three reasons to be optimistic about your finances in Norway

Things may be looking up for most households when it comes to wages and the cost of living, according to a new forecast from Statistics Norway.

Published: 15 March 2024 14:35 CET
Pictured is a busy street in Oslo.
A forecast on the Norwegian economy was full of some good news for households in Norway. Pictured is a busy street in Oslo. Photo by Nick Night on Unsplash

Norway’s national data agency has published an updated forecast for the country’s economy over the next few years, featuring plenty of good news.

In short, you can expect to be paid more, see certain costs go down, and enjoy a slowdown in price rises. However, there is also one thing to be wary of in the next couple of years.

Real wage increases over the next few years

Wages in Norway have been stagnant for a number of years, with only marginal increases in wages since 2015. Some years, such as last year, have even seen a slight decrease in real wages.

Ahead of collective bargaining agreement negotiations, unions have said their main objective is to secure a real wage increase for workers this year.

Thankfully, according to Statistics Norway, their goal seems attainable. Furthermore, a boost to wages could possibly happen in the coming years, too.

“Profitability has increased in parts of the industry, and that leaves room for real wage growth both this year and in the years to come,” Thomas von Brasch, head of research at Statistics Norway, said.

The data agency estimates an annual wage increase of 1.5 percent between 2024 and 2027.

Inflation is finally on the way down

The sharp rise in the cost of living over the past couple of years has squeezed Norwegian consumers. Energy prices and shopping bills have been among the biggest contributors.

In recent years, inflation has been at its highest level since the 1980s. Inflation peaked at 7.5 percent in October 2022.

Towards the end of this year, inflation is expected to slow to around 3 percent. This is lower than previous forecasts thanks in part to lower energy prices and a stronger krone than anticipated.

Interest rates cuts

Norway’s key policy rate was hiked from 0 percent in September 2021 to 4.5 percent in December 2023. The result has been a sharp rise in the cost of loans and mortgages in a short period of time.

The last time the interest rate was so high was in 2008. In the coming years, the key policy rate will be decreased gradually.

By 2027, Statistics Norway expects the key policy rate to fall to 3 percent. Mortgage rates, currently around six percent, are expected to fall by 1.5 percent during this period.

This should free up some more income for consumers in Norway to put away for savings or spending.

Comparatively, though, Norway is expected to lower rates more slowly than other central banks.

The bad news: Unemployment is expected to rise

Between January 2023 and January 2024, the unemployment rate rose from 3 percent to 3.9 percent.

A downturn in the Norwegian construction industry has also affected jobs in the construction sector. Such a drop in investment has not been recorded since records began in 1978.

Furthermore, a large number of asylum seekers from Ukraine has increased the overall workforce and number of those unemployed, according to Statistics Norway.

“We expect that the immigration of asylum seekers from Ukraine will increase both the workforce and unemployment going forward, but it is uncertain how big the increase will be, both in terms of how many come and how many eventually return,” Brasch said.

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ECONOMY

What lower inflation in Norway means for you 

Inflation in Norway continues to slow. However, the cost of living in the country isn’t slowing as quickly as economists expected. Here’s what that means to you. 

Published: 10 May 2024 11:44 CEST
What lower inflation in Norway means for you 

Inflation is slowing 

Norway’s Consumer Price Index, CPI, which measures changes in prices for household goods and services, has slowed yet again. 

Between April last year and the same month this year, prices in Norway rose by 3.6 percent. It marks the third time that price increases have been below four percent since the start of 2022. 

The figures, released by Norway’s national data agency Statistics Norway, mark the fourth month in a row where the 12 monthly inflation figure has been lower than the yearly figure from the month before. This means prices are rising less rapidly than before. 

“Price growth decreased for the fourth month in a row in April. Prices are still higher than they were at the same time last year for most goods and services, but they are generally rising more slowly than before,” Espen Kristiansen at Statistics Norway said. 

Food remains one of the biggest contributors to inflation 

The price of food and non-alcoholic beverages rose by 3.3 percent from March to April, according to Statistics Norway. 

Chocolate, soft drinks, coffee, and citrus foods saw the biggest price increases, which the national data agency called “unusual.” 

What wasn’t unusual, however, was the cost of food rising following Easter, when many supermarkets ran offers to compete for customers. 

“The rise must be seen in the context of the fact that large offer campaigns in connection with Easter dampened prices in March,” Kristiansen said. 

The figures for April show that food prices in Norway have increased by 6.8 percent compared to a year ago. 

The rising cost of food and drink in Norway could potentially outgrow wages this year, even if expected pay bumps will outpace forecasted inflation overall. 

Economists expected inflation to fall more 

Inflation hasn’t eased as much as some experts were expecting. Core inflation, which excludes energy prices and taxes, was measured at 4.4 percent year on year in April. This is above what economists surveyed by the newswire Reuters expected. 

Norges Bank, the country’s central bank, raised the policy rate to a 16-year high of 4.5 percent in December. The bank has said that inflation should generally be around two percent, so it has used interest rates to curb price increases. 

As inflation isn’t falling much quicker than expected, economists predict that the central bank may wait until December before slashing rates – which for consumers means that loan and mortgage repayments will remain high for the foreseeable future. 

“The fall in inflation has not been much greater than Norges Bank has thought. This, therefore, indicates that an interest rate cut may come in December instead of September,” Kjersti Haugland, chief economist at DNB Markets, told public broadcaster NRK. 

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