The International Monetary Fund (IMF) today presented its annual assessment of the Norwegian economy and the government’s economic policy.
Here comes the IMF with the warning to Norway:
And in this year’s report, the IMF again warns of high household debt.
– The IMF’s concern about the high debt in households underlines the need for the government to pursue a secure economic policy, which does not create further pressure in the Norwegian economy. We must solve people’s everyday challenges, without it contributing to creating new problems in people’s finances, says Minister of Finance Trygve Slagsvold Vedum (SP) in a press release.
Also read: Finanstilsynet warns of a sharp fall in house prices
Strong back
But the IMF notes that the Norwegian economy has returned strongly after the pandemic. Growth in the mainland economy this year is estimated at around 4 per cent this year. At the same time, there is great uncertainty about the economic outlook going forward.
Both the war in Ukraine, the danger of lower demand from Europe and bottlenecks in international value chains create uncertainty. The positive is that the Norwegian economy is less vulnerable than other countries, but the development can be both weaker and stronger than assumed.
The IMF also believes that it will be necessary to tighten fiscal policy in the future. that is, the state must spend less money. Norway must not have such large public expenditures that they give gas in an economy that is already doing well. The IMF warns of a possible overheating of the economy.
Also read: Interest rate warning from chief economist – price pressure is to blame
Must hold back
– The most important thing we do for people’s financial security now is to hold back on spending money. Then we avoid an overheating of the economy, says Slagsvold Vedum.
A strong tightening in the global financial markets can cause problems for Norway. The positive is that the IMF believes that the Norwegian banks have plenty of money and can withstand possible shocks in the financial markets in the future.
The IMF otherwise writes in the report that age-related expenses and lower transfers from the Government Pension Fund Global (the Petroleum Fund) increase the need for reforms that ensure the sustainability of the welfare state.
The electricity subsidy must be more targeted, and it is right for Norges Bank to raise interest rates gradually in order to curb inflation.
The housing market also does not escape in this report. The IMF believes it is right to maintain the tight lending restrictions in Oslo and also asks the government to gradually reduce the interest deduction. House price growth has slowed and is likely to fall further in line with this the announced interest rate increaseswhich eases the pressure on the low offer.
Also read: Christian Ringnes is a pessimist: – Large thunderclouds tower around this sun
Got praise
The previous major country analysis of Norway came in April last year. Norway was praised for its handling of the corona crisis, but the IMF called for more measures to curb the strong price growth in the housing market.
The last twelve months house prices are up 6.4 percent.
The IMF supports the government’s goal of inclusive growth and less inequality and praises Norway according to the press release to strengthen the green transition.
In the past week, a delegation from the IMF has had meetings with the Norwegian authorities, academic circles, financial institutions and the social partners. The final report will be considered by the IMF later this year.
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