IMF: Solid growth in Norwegian economy

As part of the IMF’s yearly assessment of the Norwegian economy, an IMF delegation today presented its concluding statement after more than a week of discussions on recent economic developments and Norway’s economic policy with authorities, academic institutions and social partners. A more comprehensive report will subsequently be presented to the IMF board.  

The delegation emphasizes that growth is strong, unemployment low and household incomes are rising. Mainland-GDP is projected to grow by about 2½ pct. this year and 2 pct. next year. The neutral budget stance of recent years is considered an improvement relative to fiscal policy in previous upturns. Yet, going forward, the government should target some consolidation both to help build fiscal space for the next cyclical downturn and to meet long-term demographic challenges.

The delegation stresses that house prices are high but less overvalued than last year. In combination with high and increasing household debt, the housing market represents a risk to the Norwegian economy and financial stability. The delegation warns against relaxing mortgage regulations, aimed at containing risk. High price growth in the commercial real estate market also represents a growing risk. The delegation supports the increase in the countercyclical buffer from end 2019.

– I share the IMF delegations concern about the risk to the Norwegian economy from property markets and household debt. At the same time, I am pleased to note that delegation finds house prices less overvalued than last year. We have implemented measures to curb growth in household debt and the sharp rise in housing prices that is particularly harmful to first-time buyers. We now see that these are taking effect, says the Minister of Finance.

In assessing long-term challenges to the Norwegian economy, the delegation emphasizes the need to sustain high employment levels in the face of population ageing. The high share of working-age population outside the labour force requires action. The delegation singles out reform of the sickness and disability benefits as a priority. The share of working-age population on these schemes is significantly higher than in Nordic peers.

– The government’s policy must support sustainable welfare also in the future. I agree on the need to look into how we can include more people in the labour market. We are closely following the ongoing work by the government-appointed commission on this issue. In their mandate, they are asked to come up with recommendations on how to reduce the number of people on sickness- and disability schemes, the Minister of Finance concludes.

The delegation was headed by Mission Chief Jacques Miniane.

Further reading:

• Summary of conclusions of the IMF Mission (April 25–May 6 2019) (PDF)
• Concluding statement from the IMF mission (PDF)
• Webcast from the presentation