Country Forecast Norway June 2018 Updater

Country Forecast Norway June 2018 Updater

  • June 2018 •
  • Report ID: 1697365 •
  • Format: PDF


  • Norway has a history of coalition government and cross-party consensus that typically delivers a high level of political stability. There is no right of dissolution between elections. The September 2017 election delivered another centre-right parliamentary majority. A new government was formed in January, after the Liberals decided to join the Conservatives and the Progress Party (FrP) in a coalition. This is a minority administration, as the centre-right Christian Democrats (KrF) decided to go into opposition.
  • Since late 2015 the government has significantly tightened immigration and asylum policy, and migrant flows have subsequently declined. Nevertheless, the election campaign showed that the electorate remains concerned about the integration of immigrants into Norwegian society. The FrP will continue to push for strict immigration policies, but its efforts will be limited by the Liberals' presence in the government and the KrF's role in opposition.
  • In March 2016 Norges Bank (the central bank) cut its main policy interest rate to a record-low 0.5%, amid a subdued economic outlook. Conditions have since im-proved, and the bank has adopted a more hawkish tone. The inflation target was lowered in March 2018. The Economist Intelligence Unit expects the first rate rise to take place in September, followed by a gradual policy tightening until 2022.
  • Having declined since 2014, owing to large restructuring projects in the industry, we believe that capital spending in the oil sector will increase this year, before picking up more significantly from 2019 onwards. We forecast that global oil prices will rise firmly this year, before declining in 2019-20 owing to subdued global demand. They will pick up in 2021-22, at the end of our forecast period.
  • We forecast growth of 1.9% in 2018, after real GDP expanded by 2% in 2017. Private and public consumption will remain the main drivers of growth, and investment will slow down owing to a strong base in 2017. Real GDP is forecast to rise by an annual average of 1.9% in 2019-22.
  • Inflation averaged 1.9% in 2017, below Norges Bank's former 2.5% target, but close to its new target of 2%. This year we expect inflation to pick up to 2.2%, supported by higher global energy prices, a weak krone against the euro and firm wage growth. This means that inflation is likely to remain close to target this year, as well as throughout the forecast period (in 2019-22 inflation will average 2%).


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