The Organization for Economic Co-operation and Development (OECD) presented its annual report on the economic situation in Norway on Tuesday.
As usual, Norway is well placed on most indicators and is praised for high vaccination rates and low corona deaths. The economy has already grown to the level before the corona pandemic began in the winter of 2020, and unemployment is again well below 4 per cent.
– Norwegian politicians can now direct their main focus towards ensuring macroeconomic stability in the aftermath of the corona pandemic and meeting structural challenges, the report states.
The OECD notes that most of the financial support schemes that led to Norway’s budget deficit growing enormously during the pandemic have been phased out. The organization expects that from the spring of 2022, public spending will again fall to a level below the action rule, which indicates that no more than 3 percent of the oil fund will be used annually.
Low participation in the labor market
Nevertheless, the OECD points to a number of challenges that threaten Norwegian prosperity: Restructuring after the pandemic, the still aging population and an ever-growing need for rapid action to deal with the climate crisis.
The organization is also concerned about declining participation in the labor market and low productivity growth. Norway is falling further and further behind the best countries in the OECD in terms of the proportion of people of working age who participate in the labor market, despite the fact that this is considered by the OECD to be an important pillar in the Norwegian model.
Productivity growth in Norway is still on a par with the average in the OECD’s 38 member countries, but far lower than at the beginning of the 2000s. At the same time, the Norwegian economy must undergo a major restructuring to achieve the goal of halving greenhouse gas emissions by 2030 and cuts of 90–95 per cent by 2050.
Fear problems in the housing market
The housing market is also under scrutiny by the OECD, and they are concerned that housing prices have continued to rise during the pandemic, which limits access to housing for new buyers and at the same time forces low-income households to spend large parts of their income on rent. Household debt is still very high and thus poses a separate challenge for the economy.
At the same time, the housing market has changed, and the demand for detached houses and holiday homes has increased at the expense of the demand for larger apartments.
As in several previous reports, the OECD recommends that Norwegian structural policy must focus on the green shift and increases in productivity and participation in working life. In addition, the organization recommends that the Norwegian authorities reduce tax incentives for homeowners and at the same time allow for more housing construction to calm the housing market.
In addition, the organization reiterates that Norway is working to improve efficiency in the public sector and get more value for money, due to declining growth in the Petroleum Fund together with an ever-aging population. In particular, the OECD points to social security schemes and agricultural support as areas where Norway must implement reforms to ensure the greatest possible prosperity in the future.
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