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Borrowers should prepare for an increase in interest rates starting next year, according to Statistics Norway.
The case is being updated.
Statistics Norway (SSB) comes out on Friday with its quarterly business cycle report. In the previous June report, Statistics Norway predicted a deep economic crisis for Norway, but that improvement will come sooner than expected. The third quarter report is ready.
The Norwegian economy will continue to catch up in the future, but the fallout from infection control measures and the downturn in the international economy will likely mean the recession here at home will persist for several years, says Statistics researcher Thomas von Brasch Norway in the recent economic report.
Statistics Norway calculations show that the economy will return to the level we had before the corona pandemic hit us a year from now. However, it will be a few more years before we return to a normal situation, where economic activity and unemployment are no longer greatly affected by the crisis.
Also read: Experts predicted the end of the world for the Norwegian economy. So wrong they could be, but the worries are still there
Without new closure
Statistical authorities believe that improvement is in sight, but that the situation remains dire. Statistics Norway has taken into account that new local outbreaks may occur, but that these outbreaks will be limited in scope.
The good news is that Statistics Norway does not believe that much of the economic activity in Norway, which took place on March 12, needs to be shut down again.
But when the economy gradually recovers, it also moves towards somewhat higher interest rates. The forecast is that the key policy rate will rise gradually starting in mid-2021, before ending at 0.75 percent in late 2023.
Statistics Norway writes that the sharp rise in house prices following this spring’s interest rate cuts may accelerate the timing of the first interest rate hike.
Also read: Norwegian economy: the biggest recession in history
No party at home
Therefore, Statistics Norway is the first of the intense analysis environments to predict such a rapid rise in interest rates. Record low interest rates have accelerated the housing market, but Statistics Norway doesn’t believe in any real estate parties going forward.
– We now estimate that house prices will rise 3.2 percent on an annual average this year. The removal of temporary exceptions in mortgage regulations will likely help curb house price growth in the future, von Brasch says.
Evolution of household income, debt and population, as well as the supply of housing and real interest rates, which largely determine the evolution of house prices. Developments in fundamental conditions appear to be pulling in different directions.
Great uncertainty
Therefore, Statistics Norway assumes a moderate increase in house prices in the period 2021 to 2023, but admits great uncertainty about the house price estimate.
The crown was at a record low this spring, but has strengthened. However, it is at historically weak levels against key dollar and euro currencies. Statistics Norway believes that the strengthening may be related to the fact that the economic situation in Norway looks better than a few months ago and that oil prices have risen.
On September 8, a euro cost 10.7 crowns, while the dollar was priced at 9.1 crowns. Statistics Norway assumes unchanged exchange rates for the entire forecast period, i.e. until 2023.
Up to 4 percent
The crown crisis resulted in record unemployment this spring, but unemployment is declining. As of September 1, 116,800 were completely unemployed
– We expect the improvement in the labor market to continue as economic activity recovers. According to our calculations, unemployment as measured by the Labor Force Survey will be 4.9 percent in 2020 and then gradually fall to around 4 percent in 2023, von Brasch says in the report.
NHO and LO have estimated in the deferred income arrangement an annual wage growth for the industry style of 1.7 percent in 2020. Statistics Norway calculations show that the growth in average annual wages will be around 2 percent. cent this year and next.
This year, a total price increase of less than 2 percent is expected. However, as inflation appears to rise next year, real wages, adjusted for inflation, are likely to decline. In 2022 and 2023, however, real wage growth is expected to exceed 1%.
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