{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Norway",
  "publication": "IMF News, September 16, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/09/16/pr22308-norway-imf-executive-board-concludes-2022-article-iv-consultation-with-norway",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with Norway",
  "publishDate": "2022-09-16",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Norway on September 14, 2022.\n- Norway’s economy continued to grow strongly: in 2021, real GDP grew 4.2 percent, supported by record high private consumption and public spending.\n- Activity remained buoyant in the first half of 2022, benefiting from higher energy prices despite labor shortages and global supply disruptions.\n- Core inflation reached levels significantly above the 2 percent target. Real wage growth remained moderately strong with fairly high expectations going forward amid historically low unemployment."
    },
    {
      "heading": "Economic outlook and risks",
      "content": "- Mainland real GDP growth is expected to be somewhat below 4 percent in 2022, with the forecast being especially sensitive to energy prices developments.\n- Projected dynamics and risks:\n  - Household consumption could be affected by high global energy prices, but compensatory electricity subsidies and the agreed wage increase should help support real incomes and spending.\n  - The current account is projected to remain in a high surplus, with net exports contributing positively to growth.\n  - Indirect effects from the war in Ukraine, potentially lower demand from Europe for non-energy exports, and continued supply bottlenecks weigh on the outlook.\n- Short-term risks are described as relatively balanced; ample policy space provides room to mitigate adverse shocks."
    },
    {
      "heading": "Executive Board assessment",
      "content": "- Directors noted Norway has rebounded strongly from the COVID-19 pandemic, benefitting from sound policies and solid economic fundamentals.\n- Directors emphasized that while the outlook remains favorable, it is subject to uncertainties and risks, including spillovers from Russia’s war in Ukraine and pandemic developments.\n- Long-term challenges identified: aging population, transition away from oil, and climate change.\n- Directors supported continued use of Norway’s ample buffers to respond to shocks, and emphasized that over time policies should be reoriented toward addressing long-term structural challenges and promoting green and inclusive growth."
    },
    {
      "heading": "Policy recommendations",
      "content": "- Fiscal policy:\n  - The fiscal stance remains appropriately accommodative; a return to a neutral fiscal stance should be targeted over the medium term.\n  - Call for better targeting energy subsidies toward lower income households.\n  - Encourage authorities to proactively address expected strain on public finances driven by demographic trends and the transition away from oil.\n  - Some Directors saw merit in staff’s recommendation to adopt a medium-term expenditure framework guided by an operational rule.\n  - Reforms should aim at improving spending efficiency.\n- Monetary policy:\n  - Monetary policy should continue balancing overheating risks and financial stability considerations.\n  - Directors welcomed Norges Bank’s decision to quickly increase interest rates and encouraged continued flexibility in decision making and clear public communication.\n- Financial sector and housing:\n  - Financial sector remains on sound footing.\n  - While acknowledging improvements to the macroprudential policy framework, Directors saw merit in considering additional measures, especially to address high and interest sensitive housing related debt.\n  - Encouraged easing restrictions on the supply of new housing, altering regulations to boost construction efficiency, and gradually phasing out mortgage interest deductibility.\n  - Expanding the regulatory toolkit for mitigating commercial real estate vulnerabilities should also be considered.\n- Structural reforms:\n  - Reforms should be wide-ranging with focus on raising non-oil productivity and boosting and diversifying labor force participation.\n  - Encourage promoting upskilling, changing the sickness and disability benefit system, and giving more opportunities to immigrants.\n  - Closing remaining gaps in digitalization will help further improve productivity.\n  - Directors welcomed Norway’s commitment to an ambitious climate agenda and efforts in helping to finance transition to renewable energy in developing countries."
    },
    {
      "heading": "Key statistics (Selected Economic and Social Indicators, 2019–24)",
      "content": "- Real GDP (change in percent) 1/: 2019: 0.7; 2020: -0.7; 2021: 3.9; 2022: 3.6; 2023: 2.6; 2024: 2.2\n- Real mainland GDP (change in percent): 2019: 2.0; 2020: -2.3; 2021: 4.1; 2022: 3.7; 2023: 2.1\n- Final Domestic demand: 2019: 2.3; 2020: -3.6; 2021: 3.4; 2022: 4.6\n  - Private consumption: 2019: 1.1; 2020: -6.6; 2021: 4.9; 2022: 5.8\n  - Public consumption: 2019: 1.3; 2020: 1.8; 2021: 3.8; 2022: 1.6; 2023: 1.7\n  - Gross fixed capital formation: 2019: 6.3; 2020: 0.0; 2021: 5.7; 2022: (not separately listed)\n  - Exports: 2019: 4.7; 2020: -8.2; 2021: 5.4; 2022: 3.1; 2023: 2.4\n  - Imports: 2019: -12.1; 2020: 3.0; 2021: 7.0\n- Total Domestic demand (contribution to growth) 2/: 2019: 1.2; 2020: -4.3; 2021: 5.2\n- Net exports (contribution to growth): 2019: -0.9; 2020: 2.5; 2021: 0.3; 2022: -1.5; 2023: -0.5; 2024: -0.2\n- Unemployment rate (percent of labor force): 2019: 4.4\n- Output gap (mainland economy, - implies output below potential): 2019: 0.2; 2020: -2.1; 2021: 0.8; 2022: 0.1\n- CPI (end of period): 2019: 1.4; 2020: 5.3; 2021: 3.5; (2022 not separately listed)\n- Core Inflation (end of period): 2019: 3.3; 2020: 2.8; 2021: (not separately listed)\n- Central government (fiscal accounts basis) — Non-oil balance (percent of mainland GDP): 2019: -7.4; 2020: -12.2; 2021: -11.3; 2022: -8.6; 2023: -8.4; 2024: -8.3\n- Structural non-oil balance (percent of mainland trend GDP) 3/: 2019: -7.3; 2020: -11.4; 2021: -10.8; 2022: -10.3; 2023: -9.4; 2024: -9.3\n- Fiscal impulse: 2019: -0.1; 2020: -0.6\n- In percent of Pension Fund Global Capital 4/: 2019: -2.7; 2020: -3.2; 2021: -2.9; 2022: -2.6\n- General government (national accounts definition, percent of mainland GDP) — Overall balance: 2019: 7.7; 2020: 11.5; 2021: 27.8; 2022: 23.1; 2023: 20.3; 2024: -8.0; -13.3; -9.0; -8.7 (as listed)\n- Net financial assets: 2019: 392.4; 2020: 423.0; 2021: 456.8; 2022: 425.3; 2023: 425.9; 2024: 429.3\n  - of which: capital of Government Pension Fund Global (GPF-G): 2019: 329.2; 2020: 358.5; 2021: 377.7; 2022: 352.2; 2023: 357.0; 2024: 363.5\n- Money and credit (end of period, 12-month percent change) — Broad money, M2: 2019: 4.2; 2020: 12.1; 2021: 10.4; 2022: …\n- Interest rates (year average, in percent) — Three-month interbank rate: 2019: 0.4; Ten-year government bond yield: 2019: 1.5\n- Balance of payments (percent of total GDP) — Current account balance: 2019: 2.9; 2020: 15.0; 2021: 19.4; 2022: 14.5; 2023: 11.3\n  - Balance of goods and services: 2019: 15.5; 2020: 24.0; 2021: 17.1; 2022: 13.9\n- Terms of trade (change in percent): 2019: -16.7; 2020: 42.7; 2021: 14.7; 2022: -8.1; 2023: -5.6\n- International reserves (end of period, in billions of US dollars): 2019: 65.0; 2020: 73.6; 2021: 83.0\n- Gross national saving: 2019: 32.8; 2020: 31.4; 2021: 40.3; 2022: 43.6; 2023: 40.2; 2024: 37.7\n- Gross domestic investment: 2019: 29.9; 2020: 30.3; 2021: 25.3; 2022: 24.2; 2023: 25.6; 2024: 26.4\n- Exchange rates (end of period) — Bilateral rate (NOK/USD), end-of-period: 2019: 8.8; 2020: 9.4; 2021: 8.6\n  - Nominal effective rate (2010=100): 2019: 81.7; 2020: 76.2; 2021: 80.5\n  - Real effective rate (2010=100): 2019: 83.7; 2020: 78.2; 2021: 83.1\n- Memo: Nominal GDP (in Billions of US Dollars): 2019: 404.9; 2020: 362.2; 2021: 482.2; 2022: 504.7; 2023: 486.4; 2024: 495.1\n\nIMF Communications Department; Press Release No. 22/308; September 16, 2022.\n\n---\n\n\n References\n\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/2022/09/16/pr22308-norway-imf-executive-board-concludes-2022-article-iv-consultation-with-norway"
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    "Published: September 16, 2022",
    "The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Norway on September 14, 2022.",
    "Norway’s economy continued to grow strongly: in 2021, real GDP grew 4.2 percent, supported by record high private consumption and public spending.",
    "Activity remained buoyant in the first half of 2022, benefiting from higher energy prices despite labor shortages and global supply disruptions.",
    "Core inflation reached levels significantly above the 2 percent target. Real wage growth remained moderately strong with fairly high expectations going forward amid historically low unemployment.",
    "Mainland real GDP growth is expected to be somewhat below 4 percent in 2022, with the forecast being especially sensitive to energy prices developments.",
    "Projected dynamics and risks:",
    "Short-term risks are described as relatively balanced; ample policy space provides room to mitigate adverse shocks.",
    "Directors noted Norway has rebounded strongly from the COVID-19 pandemic, benefitting from sound policies and solid economic fundamentals.",
    "Directors emphasized that while the outlook remains favorable, it is subject to uncertainties and risks, including spillovers from Russia’s war in Ukraine and pandemic developments.",
    "Long-term challenges identified: aging population, transition away from oil, and climate change.",
    "Directors supported continued use of Norway’s ample buffers to respond to shocks, and emphasized that over time policies should be reoriented toward addressing long-term structural challenges and promoting green and inclusive growth.",
    "Fiscal policy:",
    "Monetary policy:",
    "Financial sector and housing:",
    "Structural reforms:",
    "Real GDP (change in percent) 1/: 2019: 0.7; 2020: -0.7; 2021: 3.9; 2022: 3.6; 2023: 2.6; 2024: 2.2",
    "Real mainland GDP (change in percent): 2019: 2.0; 2020: -2.3; 2021: 4.1; 2022: 3.7; 2023: 2.1",
    "Final Domestic demand: 2019: 2.3; 2020: -3.6; 2021: 3.4; 2022: 4.6",
    "Total Domestic demand (contribution to growth) 2/: 2019: 1.2; 2020: -4.3; 2021: 5.2",
    "Net exports (contribution to growth): 2019: -0.9; 2020: 2.5; 2021: 0.3; 2022: -1.5; 2023: -0.5; 2024: -0.2",
    "Unemployment rate (percent of labor force): 2019: 4.4",
    "Output gap (mainland economy, - implies output below potential): 2019: 0.2; 2020: -2.1; 2021: 0.8; 2022: 0.1",
    "CPI (end of period): 2019: 1.4; 2020: 5.3; 2021: 3.5; (2022 not separately listed)",
    "Core Inflation (end of period): 2019: 3.3; 2020: 2.8; 2021: (not separately listed)",
    "Central government (fiscal accounts basis) — Non-oil balance (percent of mainland GDP): 2019: -7.4; 2020: -12.2; 2021: -11.3; 2022: -8.6; 2023: -8.4; 2024: -8.3",
    "Structural non-oil balance (percent of mainland trend GDP) 3/: 2019: -7.3; 2020: -11.4; 2021: -10.8; 2022: -10.3; 2023: -9.4; 2024: -9.3",
    "Fiscal impulse: 2019: -0.1; 2020: -0.6",
    "In percent of Pension Fund Global Capital 4/: 2019: -2.7; 2020: -3.2; 2021: -2.9; 2022: -2.6",
    "General government (national accounts definition, percent of mainland GDP) — Overall balance: 2019: 7.7; 2020: 11.5; 2021: 27.8; 2022: 23.1; 2023: 20.3; 2024: -8.0; -13.3; -9.0; -8.7 (as listed)",
    "Net financial assets: 2019: 392.4; 2020: 423.0; 2021: 456.8; 2022: 425.3; 2023: 425.9; 2024: 429.3",
    "Money and credit (end of period, 12-month percent change) — Broad money, M2: 2019: 4.2; 2020: 12.1; 2021: 10.4; 2022: …",
    "Interest rates (year average, in percent) — Three-month interbank rate: 2019: 0.4; Ten-year government bond yield: 2019: 1.5",
    "Balance of payments (percent of total GDP) — Current account balance: 2019: 2.9; 2020: 15.0; 2021: 19.4; 2022: 14.5; 2023: 11.3",
    "Terms of trade (change in percent): 2019: -16.7; 2020: 42.7; 2021: 14.7; 2022: -8.1; 2023: -5.6",
    "International reserves (end of period, in billions of US dollars): 2019: 65.0; 2020: 73.6; 2021: 83.0",
    "Gross national saving: 2019: 32.8; 2020: 31.4; 2021: 40.3; 2022: 43.6; 2023: 40.2; 2024: 37.7",
    "Gross domestic investment: 2019: 29.9; 2020: 30.3; 2021: 25.3; 2022: 24.2; 2023: 25.6; 2024: 26.4",
    "Exchange rates (end of period) — Bilateral rate (NOK/USD), end-of-period: 2019: 8.8; 2020: 9.4; 2021: 8.6",
    "Memo: Nominal GDP (in Billions of US Dollars): 2019: 404.9; 2020: 362.2; 2021: 482.2; 2022: 504.7; 2023: 486.4; 2024: 495.1",
    "[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)",
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    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
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