The Norwegian economy may be in the start-up phase of a boom period, a cyclical upturn after two and a half years of decline.
But if that’s the case, Statistics Norway (Statistisk sentralbyrå – SSB) believes that growth will be slow and cautious. This is reflected in unemployment, which is still several years away from the comfort-zone in Norway.
‘It’s now around 4.5%, from having been 3.2% in 2012. It’s expected to move slowly but surely over the next few years’, said Kjetil Telle, research director at SSB, as he presented the next three years’ economic outlook on Thursday morning.
By 2020, the end of the forecast period, SSB believes that unemployment will be at 4%, which is still high from a Norwegian perspective. Simultaneously, employment will be relatively low.
Overall, it leads to the capacity of the Norwegian economy not being fully utilized.
Better than expected
The impression that the economy may be at a turning point is supported by the growth in gross domestic product (GDP) of 2.6% in the first quarter, while analysts had expected 2%.
Additionally, household consumption grew, real income rose, and jobs are on the way.
But SSB also poured cold water onto the boiling blood of those wanting to party in an ecstasy of celebration. It’s too early to determine whether the apparent reversal of the economy, primarily due to new, increased demand in the petroleum sector, is a cyclical upturn.
Growth expectations may be randomly blurred, emphasized researcher Torbjørn Eika.
‘The question is whether, by such forecasts, we are analysing the Norwegian economy. The answer is ‘no’, we are still in a recession period, and unemployment is still higher than we are accustomed to. But the patient’s health is improving, and by 2020, he or she can be reasonably expected to be up and running,’ said Eika.
Three years of housing decline
SSB believes, like most others, that we’d ideally enjoy some cooling in the housing market, but doesn’t predict any events that will be decisive for economic development. Housing prices went through the roof in April, and plummeted surprisingly quickly in May, following very strong price increases over the past three years.
However, new housing is being built in quantity, while lending practices have become stricter, and wage increases were weak last year. Overall, this contributed to curbing demand, and any inevitable price increases that would have accompanied it’, Eika pointed out.
‘We don’t expect changed prices this year, and we predict a moderate fall in prices over the following years. Adjusted for inflation, it means a fall in house prices overall in those years of well over 10%, and perhaps up to 15%, said Eika, pointing out that the result only leads us back to the housing prices we had in 2016.
Source: NTB scanpix / Norway Today