The Norwegian economy continues to perform well with mainland (i.e. non-oil) GDP growing steadily at 2.5–3 per cent, driven by private consumption, investment and low interest rates.
Despite strong domestic demand, inflation remains subdued, running below the 2.5 per cent target, mostly due to declining import prices. Unemployment remains low at around 3–3.5 per cent. However, the overall strength of the mainland economy masks divergent trends. A strong and growing set of industries supplying goods and services to the offshore sector coexist with a non-oil related subset of the mainland economy under increasing cost and competitiveness pressures. This divergence is also evident in cost pressures especially because of rapidly rising unit labor costs (ULC).
Growth in the mainland economy is projected to continue at a moderate pace, largely supported by high activity in the petroleum sector and strong domestic demand. However, this central scenario is subject to key risks.
Executive Board Assessment
Directors agreed that structural reforms are needed to enhance the competitiveness of the mainland economy. Priority areas include labour market, pensions, trade in agriculture products, and public sector services. Sickness and disability benefits could be further reformed to improve efficiency and help contain future pressures on government spending.
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