Although inflationary pressures are gradually easing, they remain significantly above the 2% target. Overall inflation notably decreased from its 2023 peak of +5.5% to 3.1% in 2024, driven by lower price growth in food and energy, as well as base effects. However, sustained high wage growth, strong domestic demand and a weaker Norwegian krone increased import prices. Consequently, inflation remained elevated at in 2025. The combination of domestic price pressures and stagnant productivity suggests ongoing price pressures on Norwegian food, goods and services. Furthermore, the vulnerability of the NOK, coupled with the interplay between wage formation, inflation and industry profitability, poses a greater challenge to controlling inflation than in other countries. In 2026, we thus expect inflation at +2.2% before reaching the target in 2027. Consequently, Norges Bank is likely to maintain its current interest rate of 4%, possibly cutting it by the end of 2027, if at all. However, if inflation declines more quickly in the coming months, a cut in March or June could become possible. Nevertheless, any changes will be gradual, and given that the economy is growing at a decent pace, there is little reason for policymakers to reduce interest rates significantly.    

Norway's financial system remains robust, characterized by strong earnings, efficient operations and robust buffers that ensure the resilience of banks. Three key elements warrant close monitoring in the coming years: (i) the government's commitment to diversifying the economy; (ii) maintaining low levels of public debt and (iii) government support for employment in the context of a tight labor market. The Norwegian government is likely to prioritize reducing its reliance on the oil sector. Historically, this dependency has provided Norway with greater fiscal flexibility than many other European nations, as evidenced by a fiscal surplus of +25.4% of GDP in 2022. After oil prices normalized in 2023, a surplus of 16.6% was achieved. This fell to +13.2% in 2024 due to fluctuating petroleum revenues, primarily driven by high oil and gas income. Similar surpluses are anticipated in the coming years, but with the non-oil deficit widening, these will be slightly weaker, reaching around 11.3% in 2026, and 10.8% in 2027. Norway is well-positioned to implement new stimulus measures without significantly impacting public debt, which remained low at 36.3% in 2022 and increased slightly to 42.7% in 2024. It is expected to decrease further to 42.5% in 2026, and 42.0% in 2027. 

Norway’s housing market is overvalued, with prices increasing by 3.0% in 2024, roughly in line with income growth. The easing of equity capital requirements has enabled more people to borrow larger sums. This has likely contributed to the significant increase in housing prices at the beginning of the year, with a rise of around 6% by late 2025. This upward momentum is expected to continue into early 2026. Additionally, many households carry substantial debt, leaving them vulnerable in the event of an economic downturn. Debt-to-income ratios have increased to over 200% since 2018, increasing from 186% in 2015 to around 245% in the first half of 2025, while the debt-to-GDP ratio has dropped from a high of 112% at the end of 2020 to around 88% in 2025. The vulnerabilities associated with high indebtedness have been reduced and households and firms have solid debt-servicing capacity. However, there is still a heightened risk of geopolitical tensions and future market developments that could weaken financial stability.  

Norway offers a robust business environment, excelling in areas such as low market entry barriers, competition, trade and investment. In recent years, the government has introduced several reforms aimed at streamlining contract enforcement. However, there remains an opportunity to further simplify regulatory and administrative burdens on businesses.

Norway’s political environment is a stable multi-party parliamentary democracy within a constitutional monarchy. It is characterized by coalition governments, high levels of public trust and a strong welfare state partly funded by oil wealth. In October 2021, a minority center-left coalition led by the Labour Party took office under Prime Minister Jonas Gahr Støre, and Labour was re-elected in September 2025. Political stability remains assured, even in the absence of a parliamentary majority, which underlines the country's strong historical capacity for cooperation. We expect policies to diversify the economy and pursue green initiatives to be progressive, and do not anticipate any major disruption to the oil sector despite pressure from some smaller parties.