Statistics Norway expects interest rate hikes next year – E24

The case is being updated

Statistics Norway now looks a bit more optimistic about the outlook for the economy after recent vaccine news, but warns that it may still be time before enough people have been vaccinated so that infection control measures can be eased. .

– Again we are in a situation where it will get worse before getting better. We assume that a large portion of the population must be vaccinated before we can expect the economy to return to normal levels, Statistics Norway researcher Thomas von Brasch says in a press release.

Starting in the summer of 2021, Statistics Norway expects economic activity to increase markedly as the population is vaccinated and the pressure of infection decreases.

The forecast for the continental economy rises to a fall of 3.0% this year and a growth of 3.7% next year. This is 0.2 and 0.1 percentage points higher, respectively, than the agency estimated in September.

Vaccination gives higher interest rates

Although effective vaccines may soon be distributed in Norway, Statistics Norway estimates that it will probably be several months before enough people have been vaccinated.

– We expect it to happen during the spring of next year, and that activity will then increase significantly. As activity normalizes, interest rates should also rise to more normal levels.

The agency still believes that there is a gradual increase in interest rates from mid-2021, but now it believes that the interest rate will end at 1.0 percent before the end of 2023, compared to 0.75 percent previously.

To remedy the crisis in the crown, Norges Bank has cut interest rates by a total of 1.5 percentage points to a record low of zero percent, and warned that interest rates will likely not rise until the second half of 2022. .

However, this was before the recent positive news about vaccines, and more and more economists believe that the increase in interest rates may come sooner.

Norges Bank will provide an update on its view of the economy on December 17, at the same time as a new decision on interest rates.

House price growth of 3% to 4% in the coming years

House prices have developed surprisingly strongly through the crown crisis. In November, inflation was also higher than normal at this time of year, with a seasonally adjusted increase in prices of 0.8%.

Statistics Norway estimates that house prices will increase by an average of 4% this year, an upward adjustment from the previous expectation of 3.2%. Next year, the estimate remains unchanged at 3.9 percent.

“A moderate increase in mortgage rates in the future may slow down house price growth, but household income growth will gradually improve in line with the post-corona pandemic recovery,” writes Statistics Norway , which therefore represents an annual increase in house prices of around 3-4. percent for years to come.

Statistics Norway’s wage growth forecast is 2.1% next year, 3.6% in 2022, and 3.9% in 2023.

Higher unemployment for a long time

“Although unemployment will probably not decrease much in the coming months, we expect the situation in the labor market to improve when economic activity recovers in 2021,” writes Statistics Norway.

The agency estimates that unemployment as measured by the Labor Force Survey (EPA) will be 4.8 percent in 2020 and then gradually fall to around 4 percent in 2022 and 2023.

By comparison, unemployment has averaged 3.7 percent so far in the 2000s.

Statistics Norway forecasts for 2020 and 2021 (September forecasts in parentheses):

• Continental GDP: −3.0% and + 3.7% (−3.2% and + 3.6%)
• House prices: + 4.0% and + 3.9% (+ 3.2% and + 3.9%)
• Salary growth: + 2.4% and + 2.1% (+ 2.0% and + 2.3%)
• Core inflation: 3.0% and 2.2% (3.1% and 2.2%)
• EPA unemployment: 4.8% and 4.5% (4.9% and 4.5%)
• Oil investments: −4.8% and −6.0% (−3.1% and −10.1%)

Figures from Statistics Norway can be found here.