## Norway: Selected Issues

_IMF Staff Country Reports, September 17, 2018_

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**Canonical URL:** [Norway: Selected Issues](https://www.imf.org/en/publications/cr/issues/2018/09/17/norway-selected-issues-46246)

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- [Markdown version](/en/publications/cr/issues/2018/09/17/norway-selected-issues-46246/index.md)
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## Bibliographic details
- Published: September 17, 2018
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484377109.002

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### Wages and Competitiveness
- Norway may have to downwardly revise its expectations for wage growth to avoid a significant loss of competitiveness and manage the transition to a less oil-dependent economy.
- Norway was able to afford very high wage growth in the past thanks to good fortune in its terms of trade.
- Going forward, it would be prudent not to count on being fortunate twice: wage moderation would help build resilience in case of less favorable trends in international prices.
- Wage moderation would also help facilitate the needed transition out of oil by supporting sectors that did not benefit from past terms of trade gains.
- Communication from the government can continue to help in managing public expectations.

### Fiscal Policy, Dutch Disease, and Structural Consolidation
- Fiscal policy plays a key role in promoting competitiveness and containing the spending effect of Dutch Disease.
- After a prolonged expansion of fiscal policy—partly enabled by large valuation gains of the sovereign wealth fund—it is now appropriate to gradually start tightening fiscal policy.
- The ongoing up-cycle provides an ideal setting to get started on structural consolidation, which will ultimately be needed to face to address aging pressures.

### Key Findings and Policy Recommendations
- Findings:
  - Past very high wage growth was sustained by favorable terms of trade.
  - Continued high wage growth without favorable external conditions risks a significant loss of competitiveness.
  - The spending effect associated with resource wealth (Dutch Disease) can undermine other tradable sectors.
- Recommendations:
  - Pursue wage moderation to build resilience against adverse international price developments and to support non-oil sectors.
  - Use government communication to manage public expectations about wage and income prospects.
  - Gradually tighten fiscal policy after a prolonged expansion, using the current up-cycle to begin structural consolidation.
  - Implement measures to contain the spending effects of Dutch Disease to protect competitiveness and facilitate economic transition.
  - Prepare for aging-related fiscal pressures through structural consolidation.

### Subjects and Keywords
- Subject: Asset bubbles, Asset prices, Financial crises, Housing, Housing prices, Labor, National accounts, Prices, Wages
- Keywords: Asset bubbles, Asset prices, CR, financial asset, GDP, Global, house price, Housing, Housing prices, IFNW signal, IMF staff estimate, ISCR, mainland GDP, Norway, terms of trade gain, Wages

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## Content in this bundle

- **Country Report**
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  - [Country Report (PDF)](/-/media/files/publications/cr/2018/cr18280.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2018/09/17/norway-selected-issues-46246_