Vedum fears Norwegian economy could overheat

Trygve Slagsvold VedumPhoto: Beate Oma Dahle / NTB

The Minister of Finance wants to prevent the economy from overheating. He fears that this may necessitate an even faster rise in interest rates than Norges Bank has announced.

“The last couple of years have been tough for many, and for some, the everyday financial life is still demanding. When the Norwegian economy is doing very well, we must restrain the use of money in the state budget,” Minister of Finance Trygve Slagsvold Vedum (SP) said in a press release in connection with the government’s starting budget work for 2023.

“If not, we could get an overheating of the Norwegian economy. This will lead to even higher inflation, requiring even higher interest rates. It would increase the expenses of people and companies throughout the country, and we must avoid that,” he continued.

A press release from the Ministry of Finance states that the estimates in the material for the government’s budget conference indicate that registered unemployment will remain low at 2.0% in 2023 and that economic activity will be higher than normal.

War effect

The Ministry’s forecasts on Monday assume that the war in Ukraine will not have long-term detrimental effects on the international economy. The war has led to a big jump in commodity prices, in addition to oil and gas prices. Last week, oil prices rose to nearly USD 130 a barrel for the first time in eight years.

It provides high export revenues for Norway, but the war has also contributed to unrest in international financial markets. The value of the Oil Fund has fallen by around NOK 900 billion since the new year, and the fall may be greater, the Ministry warns.

Price growth

Higher energy prices lead to higher price growth both in Norway and with trading partners abroad. Electricity prices in Southern Norway have approached record high levels from December last year.

To help households with the high energy prices, the government wants to extend the security scheme for electricity until March next year.

“It is important to have secure financial management. We are now living in a more uncertain time than usual. Lately, it has really shown us how important security and preparedness are for our society,” Vedum added.

Source: © NTB Scanpix / #Norway Today / #NorwayTodayFinance

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