Norwegian structural non-oil budget deficit likely to narrow in 2020, jobless rate to drop to 3.4 pct

Norway’s structural non-oil budget deficit is likely to drop by NOK 2.6 billion from 2019 to NOK 244 billion in 2020 and the budget impulse is expected to come in at -0.2 percent. The budget is slightly tighter than anticipated; however, it appears to be well adapted to the current situation in the Norwegian economy, noted DNB Markets in a research report.

The Ministry of Finance anticipates Mainland GDP growth to come in at 2.7 percent in 2019 and 2.5 percent in 2020. Meanwhile, employment is likely to grow 1 percent 2020, whereas the jobless rate is expected to drop to 3.4 percent.

The Norges Bank’s September Monetary Policy Report showed that the structural non-oil deficit is likely to rise by 0.1 percentage point as a share of GDP each year to the end of the forecast period (2020).

“We had expected a neutral or slightly expansionary budget, while the budget now appears as slightly contractionary. However, in our view the budget seems well adapted to the current situation in the Norwegian economy with the economy running a little above full capacity”, added DNB Markets.