Infection control measures have been rolled back and we are well on our way out of the pandemic. There is strong economic growth and unemployment is low. At the same time, there is a growing shortage of labor and an increasing dynamics of wages and prices. The war in Ukraine is leading to increased uncertainty in the international economy. The war has already led to an increase in the prices of goods, and very high prices apply throughout Europe high electricity prices, gas and fuels.
, and unemployment is falling
Registered unemployment has returned to pre-pandemic levels, and the percentage of people in work has not been higher since 2012. Unemployment is now approaching the low levels that occurred before the 2008 financial crisis. With unemployment so low, pressure on wages and prices is increasing. We must avoid fiscal policies that lead to overheating of the economy. This will require an even faster increase interest ratesthan Norges Bank had already announced.
We must limit the use of money in the state budget
- Recent years have been difficult for many, and for some, everyday financial life is still demanding. When the Norwegian economy is doing very well, we have to limit the use of money in the state budget. If not, we may overheat the Norwegian economy. This will lead to even higher inflation with the need for even higher interest rates. This would increase the spending of people and companies across the country, which we must avoid, says Finance Minister Trygve Slagsvold Vedum.
Estimates in the material for the government budget conference indicate that unemployment registered in 2023 will remain low at 2,0%, and economic activity will be higher than normal. Forecasts assume that the war in Ukraine will have no long-term negative effects on the international economy.
The war in Ukraine contributed to a marked increase in the prices of raw materials, including oil and gas. This provides Norway with high export earnings, but the war also contributed to unrest in the international financial markets. The value of the Petroleum Fund has fallen by approximately NOK 900 billion this year and the decline could be greater.
We live in a more uncertain time now
- Safe financial management is important. We live in a more uncertain time than usual now. Recent times have really shown us how important security and preparedness are to our society. The government will create a good budget that will make everyday life better and safer for common people across the country, says Vedum.
Higher energy prices lead to higher inflation both in our trading partners and at home. Electricity prices in southern Norway have approached record levels since December last year. To help households with high energy prices, the government will propose extending the electricity safety program until March next year.
Source: regjeringen
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