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Economic growth will strengthen gradually until 2018 supported by higher private consumption and a rebound in non-oil investment, helped by better global prospects and a weaker currency. The pace of decline in petroleum investment is set to slow. The unemployment rate should peak in 2016, whereas inflation will edge down as the impact of the exchange rate depreciation abates and economic slack continues.
Monetary policy has been very accommodative and fiscal policy expansionary, which has supported activity. However, sustained low interest rates have fuelled a protracted housing boom. Additional fiscal stimulus, rather than a further easing of monetary policy, should be used to support activity as long as slack remains in the economy. Reforms to improve the business environment, to strengthen competition and to enhance skills and education outcomes are key for raising growth potential and maintaining inclusiveness.
Norway is using its fiscal space to assist the economic recovery. Recent tax reductions, including in corporate taxation, will improve competitiveness. Additional public investment should be considered, even though it must be made judiciously as in some areas, such as in education, ensuring spending efficiency and high social returns has proved challenging.
Economic Survey of Norway (survey page)