Norway

After a negative GDP growth rate of -1.9% in 2020, Norway recovered strongly in 2021, surpassing its pre-crisis GDP level, and continued with strong growth of +3.2% in 2022. To counter the effects of the Covid-19 crisis, the Norwegian administration introduced a household income-protection program by offering higher wage subsidies for temporary layoffs, higher unemployment benefits and expanded health care. Heavily affected companies were also able to benefit from a compensation program. Key hard-hit sectors such as health care were also strengthened. The unemployment rate fell from 4.4% in 2021 to 3.2% in 2022 and we expect a slight increase to 3.5% in 2023.

High inflation and policy tightening are weighing on domestic demand and the slowing of the global economy leads us to project GDP growth of +0.7% in 2023. Norway's economy will strengthen gradually but output growth will remain moderate at +1.5% in 2024. Solid export growth and high energy prices led to a current account surplus 0f 30.3% of GDP in 2022. Despite a reduction in the trade balance surplus due to the moderation of energy prices, we expect the current account surplus to stay high throughout 2023. Similar to other Nordic countries, Norway's rapid recovery has been accompanied by strong employment growth, and the low recovery in immigration will continue to push the unemployment rate to a new record low, keeping upside pressures on wages. Against a strong recovery, the central bank has been one of the first among advanced countries to start normalizing. We expect the policy rate to peak at 4.25% in 2023. As a consequence, the housing market rally is paused but without major corrections.

Norway ranks 9th out of 190 economies in the 2020 World Bank Doing Business survey. It is particularly well ranked in the categories of enforcing contracts and resolving insolvency. In recent years, the government has implemented a series of reforms to make it easier to enforce contracts.

A minority center-left coalition led by the Labor Party took office in October 2021. Political stability remains assured even in the absence of a parliamentary majority, underlining the country's strong historical capacity for cooperation. Policies to diversify the economy and pursue green initiatives are likely to be progressive and we do not expect any major disruption to the oil sector despite pressure from some smaller parties.