Bright times ahead for Norway's economy despite global uncertainty

Trade tensions, particularly the new US tariff policies under the Trump administration, have introduced global uncertainty.

However, Statistics Norway (SSB) expects the Norwegian economy to remain on an upward trajectory, supported by increased household purchasing power and rising defence investments, among other factors.

READ MORE: Norway’s trade minister says country unlikely to issue tariffs on US goods

Norway's economy on the rise

External pressures are unlikely to derail Norway's economic progress - provided the country is not directly hit by potential retaliatory measures from the EU, Thomas von Brasch, an economist at Statistics Norway, told the newspaper Nettavisen.

"Trade conflicts will weaken overall value creation in the world, but they will not prevent clear growth in the Norwegian economy," von Brasch said.

Statistics Norway predicts that mainland Norway's GDP will grow by 1 percent this year, up from 0.6 percent in 2024.

The forecast suggests further acceleration to around 2 percent by 2026.

Household purchasing power set to increase

A key driver of economic stability in Norway is the increasing purchasing power of households.

Real wage growth reached 2.4 percent in 2024, and is expected to continue rising by 1.5 percent in 2025.

This increase, coupled with a steady labour market, means Norwegian households will likely experience greater financial security in the years ahead.

"The combination makes this a good period for Norwegian households," Kyrre Knudsen, chief economist at Sparebank 1 Sør-Norge, told the newspaper.

READ MORE: How a trade war could affect consumers in Norway

Interest rate cuts

Norges Bank, Norway's central bank, has kept the key interest rate at 4.5 percent since December 2023.

Initially, the central bank indicated that rate cuts could begin in March 2025. However, unexpectedly high inflation and low unemployment figures have cast doubt on the timing of these reductions.

Nordea's chief economist, Kjetil Olsen, has revised his expectations, stating that Norges Bank is unlikely to lower rates in 2025 or 2026.

In contrast, Statistics Norway believes that rate cuts will happen, although more slowly than previously anticipated.

The national statistics bureau now forecasts two interest rate cuts this year, followed by three in 2026, bringing the key rate down to 3.25 percent.

"Increased uncertainty and higher inflation than expected in February mean that interest rate cuts will take somewhat longer," von Brasch explained.

READ ALSO: What Norway is doing to prepare for the upcoming tariff war

Housing market shows signs of recovery

Another signal that boosted economic optimism in Norway is the recent turnaround in the housing market.

New home sales rose by 42 percent in February compared to the same month in 2024, pointing to a potential rebound after a period of stagnation.

"We are still at very low levels, but the trend seems to be going in the right direction," Lars Jacob Hiim, CEO of Boligprodusentene, told the business newspaper E24.

The positive trend extends beyond new housing. Sales of holiday homes also rose by 3 percent during the December-February period compared to the same time frame in 2024.

Additionally, the broader housing market has gained momentum, with sales of used homes picking up.