{
  "title": "IMF Executive Board Concludes 2018 Article IV Consultation with Norway",
  "publication": "IMF News, September 17, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/09/17/pr18350-norway-imf-executive-board-concludes-2018-article-iv-consultation",
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  "overlayPath": "/en/news/articles/2018/09/17/pr18350-norway-imf-executive-board-concludes-2018-article-iv-consultation/index.md",
  "summary": "Mainland growth is projected to increase from 2 percent in 2017 to 2½ percent in each 2018 and 2019.",
  "publishDate": "2018-09-17",
  "sections": [
    {
      "heading": "Economic outlook and growth projections",
      "content": "- Mainland growth is projected to increase from 2 percent in 2017 to 2½ percent in each 2018 and 2019.\n- Real GDP and mainland indicators (selected entries from Table 1):\n  - Real GDP change (percent): 2013: 1.0; 2014: 2.0; 2015: 1.1; 2016: 1.9; 2017: 2.1.\n  - Real mainland GDP (change in percent): 2013: 2.3; 2014: 2.2; 2015: 1.4; 2016: 2.5; 2017: 2.4.\n  - Domestic demand (change in percent): 2013: 3.5; 2014: 1.6; 2015: 0.7; 2016: 2.7.\n  - Unemployment rate (percent of labor force): 2013: 3.8; 2014: 3.6; 2015: 4.5; 2016: 4.7; 2017: 4.2; 2018: 3.7.\n  - Output gap (mainland economy, - implies output below potential): 2013: 0.5; 2014: 0.6; 2015: 0.0; 2016: -0.9; 2017: -0.6; 2018: -0.2; 2019: 0.2.\n  - CPI (average): 1.8 (year not specified in table extract).\n- Headline inflation is already above the 2 percent revised target, and core inflation is slowly converging towards it.\n- Petroleum investment will pick up; output will likely start to exceed potential in 2019.\n- Unemployment has fallen below 4 percent and is expected to decrease somewhat further."
    },
    {
      "heading": "Risks to the outlook",
      "content": "- Risks are described as broadly balanced.\n- External risk:\n  - Global trade tensions could be damaging to a highly open economy such as Norway.\n- Domestic downside risks:\n  - High household debt and elevated house prices, particularly in the Oslo area.\n  - Over 90 percent of mortgages are variable rate, making highly-leveraged households and consumption vulnerable if financial conditions tighten abruptly.\n  - A sharp decline in house prices could curb private consumption and create negative spillovers to banks’ balance sheets.\n- Upside risk:\n  - The upswing may prove stronger than expected, notably through higher oil prices impacting consumption and investment."
    },
    {
      "heading": "Fiscal stance and public finances",
      "content": "- The 2017 fiscal outturn implied a stimulus of 0.2 percent of mainland trend GDP.\n- Non-oil structural balance stood at 7.5 percent of mainland trend GDP (equivalent to 2.8 percent of the GPFG).\n- The revised 2018 budget:\n  - Maintains a neutral stance by saving stronger‑than‑expected gains from oil.\n  - Focuses on boosting long-term growth potential.\n  - Key measures aim at scaling back and shifting the tax burden from direct to indirect taxes, improving public sector efficiency, enhancing infrastructure, and promoting innovation.\n- Table 1 fiscal indicators (selected):\n  - Central government overall balance (percent of mainland GDP) 2/: 2013: 9.4; 2014: 6.0; 2015: 1.3; 2016: -3.1; 2017: -2.0; 2018: -0.7.\n  - Nonoil balance (percent of mainland GDP) 3/: 2013: -4.8; 2014: -6.3; 2015: -7.1; 2016: -7.7; 2017: -8.0; 2018: -8.4; 2019: -8.5.\n  - Structural non-oil balance (percent of mainland trend GDP) 4/: 2013: -5.2; 2014: -5.9; 2015: -6.6; 2016: -7.3; 2017: -7.5; 2018: -7.6.\n  - Fiscal impulse (in percent of Pension Fund Global Capital) 5/: 2013: -3.3; 2014: -3.0; 2015: -2.7; 2016: -2.8.\n  - General government overall balance (percent of mainland GDP): 2013: 13.7; 2014: 10.8; 2015: 7.2; 2016: 4.6; 2017: 5.2; 2018: 6.9.\n  - Net financial assets: 2013: 262.6; 2014: 305.6; 2015: 335.4; 2016: 325.3; 2017: 350.3; 2018: 333.2; 2019: 328.9.\n  - Capital of Government Pension Fund Global (GPF-G): 2013: 207.7; 2014: 253.2; 2015: 284.6; 2016: 276.4; 2017: 302.8; 2018: 287.6; 2019: 285.6."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Directors agreed with the thrust of the staff appraisal and commended authorities for skillful countercyclical policies during the last downturn.\n- Short- and medium-term policy guidance:\n  - Recommend calibrated macroeconomic policies and structural reforms to sustain prosperity, boost productivity, and promote transition away from oil.\n  - Welcome decision in the revised 2018 budget to save the higher‑than‑expected oil windfall.\n  - Advise that the 2019 budget should target a modestly contractionary stance to begin unwinding the significant fiscal stimulus provided during the last downturn.\n  - Arresting the rise in non‑oil deficits of the last two decades would help relieve pressure on the real exchange rate and preserve competitiveness, and give a headstart on long-term consolidation needed for population ageing.\n- Monetary policy and financial stability:\n  - Welcome the new monetary policy framework; not expected to result in major policy changes.\n  - Emphasize that the inflation outlook warrants a gradual tightening, as signaled by Norges Bank in its forward guidance.\n  - Note high levels of capital and liquidity in the banking sector but caution against financial stability risks from high household debt and fast rising house prices.\n  - Welcome recent extension of macro‑prudential measures and underscore the need to tighten policies further, and on a regionally differentiated basis, if risks intensify.\n  - Recommend further progress in relaxing constraints on housing supply and in reducing tax incentives in favor of home ownership.\n- Labor market and structural reforms:\n  - Underscore the need to underpin competitiveness further; recommend carrying forward wage moderation achieved by social partners to facilitate transition out of oil.\n  - Encourage continuation of reforms supporting innovation and productivity growth.\n  - Note Norway’s social model requires high labor participation to be sustainable.\n  - Welcome recent agreements on private and public sector pensions to lengthen working lives and foster labor mobility.\n  - Recommend reforms to enhance work incentives, notably changes in the sickness and disability schemes, and improvements in integration of vulnerable groups into the labor market."
    },
    {
      "heading": "Financial, external, and other indicators (selected from Table 1)",
      "content": "- Gross national saving (percent of GDP): 2013: 38.1; 2014: 38.6; 2015: 35.5; 2016: 33.1; 2017: 34.3; 2018: 36.1; 2019: 36.4.\n- Gross domestic investment (percent of GDP): 2013: 27.9; 2014: 28.1; 2015: 27.6; 2016: 29.3; 2017: 28.8; 2018: 28.3; 2019: 28.7.\n- Current account balance (percent of mainland GDP): 2013: 13.0; 2014: 4.4; 2015: 6.5; 2016: 9.5.\n- Exports of goods and services (volume change in percent): 2013: -1.7; 2014: 3.1; 2015: -1.8.\n- Imports of goods and services (volume change in percent): 2013: 5.0; 2014: 2.8; 2015: 2.9.\n- Terms of trade (change in percent): 2013: -11.7; 2014: -9.9; 2015: 4.9; 2016: 0.8.\n- International reserves (end of period, in billions of US dollars): 2013: 57.9; 2014: 66.9; 2015: 58.5; 2016: 60.9; 2017: 65.1; 2018: 73.3; 2019: 78.7.\n- Fund position and exchange rates:\n  - Holdings of currency (percent of quota): 2013: 78.2; 2014: 85.6; 2015: 89.8; 2016: 93.9; 2017: 93.5.\n  - Holdings of SDR (percent of allocation): 2013: 95.1; 2014: 94.8; 2015: 96.4; 2016: 88.3; 2017: 102.7.\n  - Quota (SDR millions): 1,884; 3,755 (table entries as shown).\n  - Exchange rate regime: Floating.\n  - Bilateral rate (NOK/USD), end-of-period: 5.9; 8.1; 8.4; 8.3.\n  - Real effective rate (2010=100): 99.0; 94.2; 86.5; 86.6; 87.4.\n\nSource: IMF Press Release No. 18/350 — \"IMF Executive Board Concludes 2018 Article IV Consultation with Norway\", September 17, 2018.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Norway and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm.\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/09/17/pr18350-norway-imf-executive-board-concludes-2018-article-iv-consultation"
    }
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    "Published: September 17, 2018",
    "Mainland growth is projected to increase from 2 percent in 2017 to 2½ percent in each 2018 and 2019.",
    "Real GDP and mainland indicators (selected entries from Table 1):",
    "Headline inflation is already above the 2 percent revised target, and core inflation is slowly converging towards it.",
    "Petroleum investment will pick up; output will likely start to exceed potential in 2019.",
    "Unemployment has fallen below 4 percent and is expected to decrease somewhat further.",
    "Risks are described as broadly balanced.",
    "External risk:",
    "Domestic downside risks:",
    "Upside risk:",
    "The 2017 fiscal outturn implied a stimulus of 0.2 percent of mainland trend GDP.",
    "Non-oil structural balance stood at 7.5 percent of mainland trend GDP (equivalent to 2.8 percent of the GPFG).",
    "The revised 2018 budget:",
    "Table 1 fiscal indicators (selected):",
    "Directors agreed with the thrust of the staff appraisal and commended authorities for skillful countercyclical policies during the last downturn.",
    "Short- and medium-term policy guidance:",
    "Monetary policy and financial stability:",
    "Labor market and structural reforms:",
    "Gross national saving (percent of GDP): 2013: 38.1; 2014: 38.6; 2015: 35.5; 2016: 33.1; 2017: 34.3; 2018: 36.1; 2019: 36.4.",
    "Gross domestic investment (percent of GDP): 2013: 27.9; 2014: 28.1; 2015: 27.6; 2016: 29.3; 2017: 28.8; 2018: 28.3; 2019: 28.7.",
    "Current account balance (percent of mainland GDP): 2013: 13.0; 2014: 4.4; 2015: 6.5; 2016: 9.5.",
    "Exports of goods and services (volume change in percent): 2013: -1.7; 2014: 3.1; 2015: -1.8.",
    "Imports of goods and services (volume change in percent): 2013: 5.0; 2014: 2.8; 2015: 2.9.",
    "Terms of trade (change in percent): 2013: -11.7; 2014: -9.9; 2015: 4.9; 2016: 0.8.",
    "International reserves (end of period, in billions of US dollars): 2013: 57.9; 2014: 66.9; 2015: 58.5; 2016: 60.9; 2017: 65.1; 2018: 73.3; 2019: 78.7.",
    "Fund position and exchange rates:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Norway and the IMF](http://www.imf.org/external/country/NOR/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm.](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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