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.
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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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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