OECD Economic Outlook, Volume 2026 Issue 1

Norway

Mainland GDP will continue to recover, albeit at a moderate pace. High oil and gas prices will increase export and government revenues substantially. The direct impact of petroleum prices on inflation will be limited thanks to various energy support measures. However, import prices will rise and demand from trading partners will decline. Both business investment and mainland exports are expected to weaken somewhat. Nonetheless, household consumption will continue to sustain mainland GDP, supported by higher-than-anticipated wage growth.

Monetary policy has remained appropriately restrictive, given persistent underlying cost pressures. The central bank raised the policy interest rate by ¼ percentage point to 4.25% in early May, which should help keep inflation expectations anchored. Fiscal policy remains expansionary. As the structural non-oil deficit has substantially increased, the government should refrain from further loosening to avoid adding further impetus to inflation. Reducing regulatory burdens, particularly in the electricity sector, would boost sustainable growth.

Mainland activity has been growing solidly

Mainland GDP growth picked up in 2025, with the momentum continuing into early 2026. This has been mainly driven by household consumption, thanks to strong growth in disposable income buoyed by collective wage settlements. Business surveys pointed to solid business investment and production in early 2026. Housing investment ceased declining in late 2025 after a significant drop. Mainland exports continued to increase, while US tariffs have had little effect on Norwegian exports, given the country’s limited direct exposure. Inflation has been volatile over the past year, largely due to energy and food prices, but overall has turned out to be stronger than expected. Underlying cost pressures have been high, against the background of weak productivity growth.

Norway

Source: OECD Economic Outlook 119 database; and the Ministry of Finance, Norway.

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Norway: Demand, output and prices

Statlink

Surging petroleum prices will increase export and government revenues, while their impact on domestic inflation is expected to be comparatively limited. Norway relies almost exclusively on hydropower for electricity generation. Various energy support measures help to keep domestic inflation from rising, including the administered electricity price introduced in late 2025 as well as the temporary reduction in excise duties on fuel. Consumer price inflation in April stood at 3.4%, almost unchanged from the average of the previous three months. The profitability in the export-oriented energy-intensive sector in Norway will likely increase as sales prices increase more than costs. As the sector plays an important role in wage negotiations, this could raise aggregate wage growth.

Macroeconomic policies should keep inflation in check

The central bank revised upward the near-term interest rate path in late March and raised the policy interest rate from 4% to 4.25% in early May, as underlying inflation pressure turned out to be much stronger than expected, amid higher expected global inflation. The policy interest rate is projected to remain at the current level until mid-2027 and then be reduced back to 4%. The revised National Budget was published in mid-May. The fiscal stance is easing further in 2026, including through cuts to personal income taxes, various energy support measures and higher defence spending. Overall, the structural non-oil budget deficit is expected to widen by around 1 percentage point, reaching 12.6% of mainland GDP in 2026. Nonetheless, the structural non-oil deficit in 2026 is expected to remain below the threshold of 3% of the value of the Government Pension Fund Global (GPFG), the government’s oil fund. Further fiscal expansion would make the conduct of monetary policy difficult. The projections assume a slight fiscal consolidation in 2027.

Mainland GDP will grow robustly

Mainland GDP will grow by 1.7% and 1.5% in 2026 and 2027, respectively, despite the global energy price shock. Inflation will edge up mainly through a stronger impulse from import prices, which is somewhat mitigated by the recent currency appreciation. Household purchasing power will remain relatively strong due to stronger-than-anticipated wage growth. Business investment will become muted because of heightened uncertainty about the global economy and higher imported input costs. Higher interest rates will weigh on both business and housing investment. Mainland exports will be affected by lower demand from trading partners. So far, the authorities have not changed their estimate of oil production. A stronger-than-expected rise in energy prices would considerably boost the value of the GPFG, possibly leading to even more fiscal stimulus. In contrast, a sharp drop in international financial markets would reduce the GPFG value significantly, which may result in strong fiscal tightening.

Easing regulatory burdens will increase efficiency

Licensing requirements are relatively high in Norway compared with other OECD countries, notably due to the lack of a risk-proportionate approach. Reducing licensing requirements would spur business dynamism and productivity growth. Streamlining duplicative procedures among public bodies for the development of power plants and grid facilities would help enhance electricity production capacity and thereby ensure sustainably lower energy prices. This would reduce the need for energy subsidies, which are currently largely untargeted. While these measures mitigate the impact of high energy prices in the short run, they should be unwound so that support becomes more targeted toward vulnerable households and essential energy consumption.