Growth is projected to recover gradually in 2016 and 2017 as non-oil investment picks up in response to higher exports and some new oil investment projects start up. Aggregate demand will also be sustained by accommodative macroeconomic policies. Unemployment will rise but remain low in the OECD context. Inflation has been temporarily boosted by currency depreciation but is otherwise contained by remaining cyclical slack. The extensive welfare state is cushioning the impact of the economic slowdown on well-being and protecting the vulnerable.
Monetary and fiscal policies are appropriately supporting activity, but will have to tighten as growth picks up. The use of macro-prudential tools to contain risks from high and rising house prices and household debt is welcome. Further improvement to the business environment, including shifting from direct to indirect taxation, and better business regulation and education outcomes would set the conditions for broad-based and inclusive growth.
Norway has a comprehensive framework for incorporating environmental issues into policy-making and a long experience in the use of taxation of greenhouse gas emissions. Most emissions are covered by carbon taxes and/or the EU emission trading system. Further research into more cost efficient greenhouse-gas emission reductions would be useful.