Finance minister expects brighter times

Good news for Norway going into the summer holidays

Vedum

Photo: Emilie Holtet / NTB
Norwegian Finance Minister Trygve Slagsvold Vedum (Center Party) is looking forward to the summer. For him, there is hardly a dark cloud on the Norwegian economic horizon.

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Norway’s economic development is going in the right direction for its finance minister: price growth is falling, unemployment is stable, and wage growth is high enough for people to have higher purchasing power.

Sweden had slightly lower interest rates than Norway, but they also have higher unemployment, lower wage growth and poorer affordability, according to the macroeconomic figures that formed the backdrop for the meeting between the Nordic finance ministers in Stockholm in early June. Compared with Sweden, the vast majority of the numbers are positive in Norway’s favor.

“Since the finance ministers’ meeting last year, we have had a difficult time in Norway, but in Sweden, it has been really rough. There, purchasing power has fallen much more than here, and unemployment is much higher. An average industrial worker in Sweden also has a completely different salary level than we here in Norway,” said Finance Minister Trygve Slagsvold Vedum (Center Party) to NTB.

And despite the fact that the Swedish prime lending rate is 3.75%—​​compared with the Norwegian rate of 4.5%—​​household consumption is lower in Sweden than in Norway. This, in part, accounts for consumer confidence being weaker in Norway, as Norwegian households are more pessimistic about the future than their neighbors in Sweden.

But they apparently have no reason to be, according to the finance minister. The outlook is good for bright summer nights and a slightly less anxious everyday life, he believes.

Increased purchasing power

Vedum points out that Norway is close to wage growth of around 5.2%, while price growth is on the way down. It should be at 3.9% for the year as a whole, according to the Ministry of Finance’s budget. This means that people can expect real wage growth, in other words, what is left after inflation has taken its toll, growth of about  1.3% this year.

In that case, it will be the largest increase in purchasing power in over 10 years.

“For many, this wage increase will only be realized in the autumn, when the local negotiations are completed. Those who may have felt the high increase in prices in recent years the most, families with children, will also get further relief through reduced day-care prices and one year of cost-free time at after-school programs, Vedum said.

The announced increase of 10% in the student support also comes into effect over the summer, before the finance minister outlines what the government will be doing with the pension levels, the housing program,  and the structure of the electricity subsidy.

A political choice

But the finance minister and government have little influence on the setting of interest rates and monetary policy. It is the Norges Bank that prevails with statutory independence, based on a range of macroeconomic parameters and development trends.

Nonetheless, Vedum acknowledges that  the government has played a role.

“Much is the result of the policy we have pursued and the choices we have made. We made many tough decisions in the fall of 2022, which created a lot of outcry. Then we were afraid of high unemployment. Good wages don’t help if you don’t have a job. But we are not there,” he said.

Among other things, Vedum pointed out that the electricity subsidies helped many people deal with a critical situation when energy prices skyrocketed. The government has also increased child benefits and introduced stronger financial aid measures for people with poor means, more than their colleagues in neighboring countries did, according to him.

There doesn’t seem to be a dark cloud on the finance minister’s horizon, but he sees tremors that could be inflicted on Norway from the outside as the greatest risk.

“The biggest X factor will hit if something dramatic happens in the wars. But also in that context, things look better now than in the winter of 2022. The economy is better prepared, and we are not so dependent on imports of food and goods. We have better control and bigger muscles to handle this now,” Vedum said.

This article originally appeared in the July 2024 issue of  The Norwegian American.

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NTB (Norsk Telegrambyrå), the Norwegian News Agency, is a press agency and wire service that serves most of the largest Norwegian media outlets. The agency is located in Oslo and has bureaus in Brussels, Belgium, and Tromsø in northern Norway