Norway’s economic activity projected to rebound in ’24 – IMF

Norway’s economic activity is projected to rebound in 2024, with real GDP growth expected to rise to 1.5 per cent, supported by a stronger offshore sector, according to the International Monetary Fund’s (IMF) last review.

Mainland activity, however, will remain subdued, increasing by only 0.8 per cent amid still tight financial conditions.

Norway’s real GDP growth slowed to 0.5 per cent in 2023, from an average of 3.5 per cent over 2021–22, due to declines in private consumption and gross fixed investment, particularly in residential investment.

Tighter financial conditions have also impacted the commercial real estate sector with rising debt-servicing costs and declining valuations.

Despite easing since early 2024, financial conditions remain tight, reflecting a restrictive monetary policy stance following Norges Bank’s cumulative 450 basis points increase in its policy rate.

Headline inflation, while retreating from its 2022 peak, remains high and above the 2 per cent target, driven by persistent service inflation and weaker currency.

Inflation is projected to reach 3.3 per cent by the end of 2024 and return to the target by mid-2026.

IMF directors emphasised the need for a tight monetary policy to ensure inflation converges to the target and recommended a neutral fiscal stance to support disinflation.

They also highlighted the importance of structural reforms to address challenges such as population ageing, productivity slowdown, and geoeconomic fragmentation.

Comprehensive reforms are needed to foster diversification, raise productivity growth, and mitigate the impact of these challenges.